While the U.S. dodged earlier predictions this year of a mild recession, Cal State Fullerton economists say \u201cthorny issues\u201d remain related to inflation and \u201calarming\u201d hiring conditions.<\/p>\n
On Thursday, economists Anil Puri and Mira Farka made their predictions for 2026, with their outlook for this year<\/a> falling short of more dire expectations forecast last year. A mild recession, which they previously predicted would land a year ago<\/a>, was pushed to late 2025 \u2014 but a \u201cgradual downshift\u201d<\/a>\u00a0never came.<\/p>\n This year, the economists said the U.S. economy has shown \u201cremarkable resilience,\u201d \u201coutperforming dire predictions, not just barely, but by a wide margin.\u201d<\/p>\n The economists said they wouldn\u2019t be surprised if the remainder of the year is marked by \u201ca few more bumps, with payrolls weakening further as firms await clarity on trade deals, the government shutdown and overall consumer demand.\u201d<\/p>\n Inflation also is expected to likely continue to \u201cedge higher into the first quarter of next year, though we do not expect it to get out of hand, anticipating a peak of around 3.5%,\u201d the economists said. Inflation has \u201cyet to crest,\u201d and \u201cthe labor market has yet to find its floor \u2014 though neither is expected to inflict as much pain as once feared.\u201d<\/p>\n The current annual inflation rate for the U.S. was 3% for the year period ending in September. New inflation statistics published by the regional Consumer Price Indexes for September<\/a> show an 3.5% inflation rate for Los Angeles and Orange counties.\u00a0 That\u2019s the biggest cost-of-living bump<\/a> in 16 months.<\/p>\n Also see: Affordable housing, cost of living among biggest worries for CSUF economists<\/a><\/p>\n The trade war that President Donald Trump\u2019s administration launched in the spring did not have the \u201cseismic shift\u201d on inflation that everyone predicted, they explained. \u201cYet six months on, the overall inflation rate \u2014 though edging higher \u2014 has remained remarkably well-behaved, and the tariff effect strikingly muted.\u201d<\/p>\n They explained this is because U.S. firms stockpiled \u201coodles of just about everything in the first quarter,\u201d allowing them to sell from inventory rather than raise prices.<\/p>\n But those stockpiles are now being drawn down, and the debate over who ultimately bears the cost has flared up, they said.<\/p>\n While the uptick in inflation is unsettling, the recent news from the labor market is \u201cdownright alarming,\u201d they said. The hiring rate has slipped below levels typical of a mid-cycle expansion, while the quits rate \u2014 a key gauge of worker confidence \u2014 has dropped to its lowest point in a decade, excluding the pandemic.<\/p>\n \u201cThe job-openings-to-unemployed ratio has slipped below 1 \u2014 meaning there are now fewer openings than job seekers \u2014 after holding above that threshold throughout the entirety of Trump\u2019s first term,\u201d they said.<\/p>\n Expensive housing<\/p>\n Beyond the labor market, California continues to grapple with its long-standing housing crisis. Housing remains the single largest expense for most residents<\/a>, and home prices have soared as supply remains constrained<\/a>, and the cost of ownership far exceeds that in much of the country<\/a>.<\/p>\n In August 2025, the median price for a single-family home reached $1.39 million in Orange County<\/a>, $930,700 in Los Angeles County, $625,000 in Riverside County, $503,000 in San Bernardino County, and $899,100 statewide. Since August 2019, these prices have risen by 71%, 48.3%, 48.8%, 59.7% and 45.6%, respectively.<\/p>\n