Boosted by investments in AI, a revitalized aerospace industry and a growing U.S. defense budget, California\u2019s economic growth is expected to continue outpacing the nation, according to a forecast from the UCLA Anderson School of Management.<\/p>\n
However, tariffs, deportations and high energy prices are likely to somewhat slow growth, though it should pick up next year and in 2028, the fourth-quarter report said.<\/p>\n
A major weakness, though, has been jobs. The state\u2019s booming economy has not resulted in broad employment gains, a disappointing trend expected to continue the rest of the year.<\/p>\n
California added only 138,500 jobs in the 12 months ending in August, with its unemployment rate standing at 5.1% that month, one point higher than the national average.<\/p>\n
\u201cCalifornia\u2019s new bifurcated economy is not one between East and West, but one between AI, Aerospace and the like and the rest of the economy,\u201d senior economist Jerry Nickelsburg said in the report released this week<\/a>. <\/p>\n \u201cBut a rising tide does not necessarily lift all boats, particularly when that tide is fundamental technological change. There remain signs of concern in labor markets,\u201d he said.<\/p>\n With final figures in, the report notes that the state\u2019s economy grew at a 3.7% rate in the first quarter, substantially higher than the 2.1% rate of the overall U.S. economy.<\/p>\n The high growth rate exemplifies the state\u2019s rich concentration of high-tech and other high-productivity industries. <\/p>\n Six of the 10 largest venture capital investments during the first quarter were in the San Francisco area, while in the second quarter, 82% of all venture capital investment went to California, according to the report.<\/p>\n The state\u2019s aerospace industry is further benefiting from increased commercial aircraft production, defense purchases, space exploration and satellite production, it said.<\/p>\n The splurge in venture capital spending has been driven by the artificial intelligence boom, highlighted by OpenAI closing a record-breaking $122-billion funding round<\/a> on March 31 at an $852-billion valuation.<\/p>\n In Southern California, where SpaceX has spawned scores of aerospace and defense startups, Costa Mesa\u2019s Anduril Industries closed its own record-breaking $5-billion funding round<\/a> in May at a $61-billion valuation.<\/p>\n However, the growth in those sectors has not resulted in widespread state job gains.<\/p>\n In Hollywood, a slowdown in film production has prompted Disney, Sony, Amazon and other studios to announce layoffs, with the industry shedding roughly 57,000 jobs<\/a> in four years. <\/p>\n The impending merger of Paramount Skydance and Warner Bros. Discovery could erase another 4,500 jobs in Los Angeles County<\/a>, according to an August report commissioned by the county government.<\/p>\n