{"id":504971,"date":"2026-10-23T03:32:14","date_gmt":"2026-10-23T03:32:14","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/504971\/"},"modified":"2026-10-23T03:32:14","modified_gmt":"2026-10-23T03:32:14","slug":"csuf-california-economy-pumped-up-by-ai-but-weak-hiring-persists-pasadena-star-news","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/504971\/","title":{"rendered":"CSUF: California economy pumped up by AI, but weak hiring persists \u2013 Pasadena Star News"},"content":{"rendered":"

\"An<\/p>\n

An animated Mira Farka, professor of economics and co-director of the Woods Center for Economic Analysis and Forecasting at California State University, Fullerton, is one of the main speakers during the 32nd annual economic forecast on Thursday, October 22, 2026 in the city of Irvine.
\n(Photo by Karen Tapia \/ Orange County Register, SCNG\n<\/p>\n

\"Anil<\/p>\n

Anil Puri, economist and director of the Woods Center for Economic Analysis and Forecasting at California State University, Fullerton, speaks during the 32nd annual economic forecast on Thursday, Oct. 22, 2026, in the city of Irvine.
\n(Photo by Karen Tapia \/ Orange County Register, SCNG)\n<\/p>\n

\"An<\/p>\n

An animated Mira Farka, professor of economics and co-director of the Woods Center for Economic Analysis and Forecasting at California State University, Fullerton, is one of the main speakers during the 32nd annual economic forecast on Thursday, October 22, 2026 in the city of Irvine.
\n(Photo by Karen Tapia \/ Orange County Register, SCNG\n<\/p>\n

Show Caption<\/p>\n

1 of 3<\/p>\n

An animated Mira Farka, professor of economics and co-director of the Woods Center for Economic Analysis and Forecasting at California State University, Fullerton, is one of the main speakers during the 32nd annual economic forecast on Thursday, October 22, 2026 in the city of Irvine.
\n(Photo by Karen Tapia \/ Orange County Register, SCNG\n<\/p>\n

Expand<\/a><\/p>\n

California\u2019s economy, fueled by multibillion-dollar investments in artificial intelligence and defense spending, is outpacing the nation\u2019s even as the state feels the sting from significant weakness in hiring and sliding consumer optimism, Cal State Fullerton economists said Thursday.<\/p>\n

Anil Puri and Mira Farka said in their annual forecast<\/a> that they\u2019re worried the Southern California jobs market in could suffer if it becomes overly concentrated in AI, especially if the technology boom turns into a bubble.<\/p>\n

\u201cI feel at the national level, we\u2019re in balance with AI and jobs. But at the local level we\u2019re imbalanced. There are a lot of jobs at risk,\u201d Farka told the Southern California News Group. \u201cAt least 17% of the workforce in Orange County is at risk for disruption by AI. That\u2019s going to create a shift in jobs rather than a replacement of jobs.\u201d<\/p>\n

Puri echoed Farka\u2019s observation.<\/p>\n

The sectors in Orange County that are most vulnerable to AI exposure are professionals, information technology, finance and insurance work, he said. \u201cWe do think about how we can protect the data or change the training for our workforce to meet that challenge,\u201d Puri said.<\/p>\n

Investments in technology are pushing up the state\u2019s gross domestic product, but underneath all that growth lurks a trifecta of trouble: flat hiring, a frozen housing market and sour consumers.<\/p>\n

And while evidence of an economic slowdown abounds, Farka said that talk of a U.S. recession is off the table because of the offsetting boost in tech and defense spending.<\/p>\n

She cited California\u2019s GDP, which grew 3.5% in the first half of 2026 compared with the same period a year ago, well ahead of the nation\u2019s 2.4%.<\/p>\n

The theme of CSUF\u2019s 94-page economic forecast focused on AI\u2019s effects.<\/p>\n

Puri pointed out that AI now accounts for 37% of California\u2019s growth, nearly double the share in 2023 and 2024 when it hovered around a fifth, and well above the 27% it accounts for nationally. The leap came in 2025, when AI\u2019s share of the state\u2019s growth doubled, he said.<\/p>\n

Despite the state\u2019s growth, rising interest rates, inflation and a stalled housing market have consumers turning gloomy about the future, the economists noted.<\/p>\n

\u201cThe mood among American consumers has turned from sour to sullen,\u201d they wrote in their forecast. \u201cSentiment has languished for almost the entire post-pandemic period, but some measures are now plumbing new depths.\u201d<\/p>\n

The U.S.-led war in Iran, now in its eight month, has disrupted global crude oil supplies<\/a> through the Strait of Hormuz passageway in the Persian Gulf. About a fifth of the world\u2019s crude oil that travels through the waterway has been largely halted, leading to historically high gas and diesel prices and inflation in the U.S.<\/p>\n

Growing jitters among consumers showed up recently in the University of Michigan\u2019s consumer sentiment index.<\/a> The economic barometer fell to an all-time low of 44.8 in May, its first sub-50 reading in 74 years, and the four lowest readings ever have all come in the past six months.<\/p>\n

While CSUF\u2019s economists don\u2019t foresee a recession, they do see growth slowing.<\/p>\n

The federal government\u2019s Bureau of Economic Analysis in late September said the nation\u2019s GDP expanded at a 2.2% rate in the second quarter,<\/a> down from 2.5% in the first quarter.<\/p>\n

CSUF economists in their forecast expect more interest rate hikes in 2027 to help tame inflation caused by the oil price shock.<\/p>\n

The U.S. Labor Department recently reported that inflation accelerated in September<\/a> as gasoline and many other goods and services became more expensive. The consumer price index rose 3.7% in September compared with a year ago and was up from 3.4% in August.<\/p>\n

Concerned about inflation, the Federal Reserve responded in September by raising its benchmark federal funds rate<\/a> by a quarter-point to a target range of 3.75% to 4%. It was the Fed\u2019s first rate increase in more than three years.<\/p>\n

\u201cThe Fed has penciled in one more rate increase this year, followed by a long pause through 2027,\u201d\u00a0 the economists said. \u201cMarkets are more hawkish still, pricing in roughly three to four additional hikes over the next year.\u201d<\/p>\n

Puri and Farka said they expect one more hike this year, followed by two in 2027.<\/p>\n

Weak income<\/p>\n

Another worry for the economists is disposable income, which they say is limping along at a 1.3% annual pace this year, down from 1.6% last year and less than half the 3.3% pace of 2024.<\/p>\n

The nation\u2019s wage hikes have fared worse, turning negative this year as prices picked up. Households are leaning on credit to fill the gap. Credit card balances have climbed to $1.26 trillion, up $54 billion from a year earlier.<\/p>\n

Meanwhile, the savings rate has dropped to 4.1% of disposable income, the lowest since June 2022, when inflation was raging at 9%, and far below its pre-pandemic norm of 6.1%.<\/p>\n

Personal savings have fallen below $1 trillion at an annual rate, some $200 billion less than a year ago and $400 billion below 2024 levels.<\/p>\n

\u201cThe erosion in savings is concentrated at the bottom, among low income households,\u201d the economists said. Only 31% saved anything, down from 35% a year earlier, and just 49% paid all their bills on time, down from 54%.<\/p>\n

\u201cFor almost two years now, the labor market has been moribund, stuck in what might be called the Great Stasis: a low-hire, low-fire equilibrium in which few are hired, fewer are fired, and almost no one quits,\u201d according to the economists.<\/p>\n

\u201cSluggish hiring has been the hallmark of both the national and regional economies for two straight years,\u201d they said.<\/p>\n

\u201cJob growth across Southern California\u2019s three largest economies (Orange County, Los Angeles County and the Inland Empire) has slowed to a crawl, a fraction of its pre-pandemic pace,\u201d according to the forecast.<\/p>\n

Housing isn\u2019t much better, the economists said.<\/p>\n

\u201cIf the labor market is frozen, the housing market is an icy tundra,\u201d they wrote.<\/p>\n

The 30-year fixed mortgage rates hit 7.4% earlier this month<\/a>, the highest in nearly three years and up from 6.3% a year earlier. On Thursday, Freddie Mac said the benchmark mortgage rates slipped to 7.32%. One year ago, the average rate was 6.19%.<\/p>\n

Defense spending powers up<\/p>\n

Amid the region\u2019s stalled hiring, the defense industry is making strides.<\/p>\n

Southern California\u2019s aerospace and defense sector, which lost about half its jobs following an early-1990s peak, is growing quickly, driven by venture-backed, defense-tech and space startups clustered in coastal communities in Los Angeles and Orange County.<\/p>\n

Orange County is at the heart of the revival.<\/p>\n

Aerospace and defense employment in the county grew 8.4% in 2025, to about 22,600, according to the economists. The local industry stands to make even further gains as the Trump administration has proposed a record $1.5 trillion defense and national security budget for the current fiscal year, which began Oct. 1.<\/p>\n

Local highlights<\/p>\n

The Woods Center index of Orange County business sentiment \u2014 based on a quarterly survey of Orange County executives \u2014 found that inflation remains a top concern.<\/p>\n

\u2014Nearly half, or 48.1%, expect inflation of 3% to 3.5% by December. That\u2019s up from 26.4% in the previous quarter, while 28.8% expect 3.5% to 4% and 9.6% expect it to top 4%. Only 13.5% expect it to ease between 2.5% and 3%, down from 18.9%. More than half of\u00a0 the surveyed firms plan to raise prices: 32.7% expect slight increases and 21.2% moderate ones. Another 44.2% plan to hold prices steady, and just 1.9% expect to cut them.<\/p>\n

\u2014Nearly all firms are using or planning to use AI, but only 9.6% use it extensively across multiple areas of their business. Another 34.6% use it regularly but only in selected areas, while more than half (51.9%) are still experimenting, using it sparingly or planning to deploy it within the next year. Just 3.8% have no plans to use AI.<\/p>\n

\u2014Roughly 88.5% expressed concern about passage of Prop 40 on the Nov. 3 ballot, a one-time 5% tax on billionaires. About 57.7% said they were very concerned passage could prompt high-income individuals and businesses to move investment or economic activity out of California, while 30.8% said they were somewhat concerned. Only 9.6% were not very concerned, and 1.9% were unsure.<\/p>\n","protected":false},"excerpt":{"rendered":"An animated Mira Farka, professor of economics and co-director of the Woods Center for Economic Analysis and Forecasting…\n","protected":false},"author":2,"featured_media":504972,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[163,165,164,387,7,3005,383,6774,1011,1286,137,100,611,388,1969,612,5518,1970],"class_list":["post-504971","post","type-post","status-publish","format-standard","has-post-thumbnail","category-anaheim","tag-anaheim","tag-anaheim-headlines","tag-anaheim-news","tag-business","tag-california","tag-csuf","tag-economy","tag-energy","tag-housing","tag-jobs","tag-los-angeles-county","tag-news","tag-orange-county","tag-real-estate","tag-retail","tag-riverside-county","tag-san-bernardino-county","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/504971","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=504971"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/504971\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/504972"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=504971"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=504971"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=504971"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}