California's traditional jobs report suggests the state added 15,000 jobs in December, while a hybrid measure that has more closely tracked final jobs data suggests a smaller increase of 6,000 jobs. The state's unemployment rate rose to 5.5 percent, as the labor force grew slightly but fewer workers reported being employed.
Our post provides an updated snapshot of housing affordability in California. Over the last few years, we have seen a rapid increase in California housing costs, led by the dramatic increase in the costs of purchasing a home. Monthly costs for a newly purchased home are about $2,600 higher than they were just a few years ago, driven both by increases in home prices between 2020 and 2022 and an increase in mortgage rates since 2022.
The rapid increase in mortgage rates in 2022 has also left most existing homeowners "locked-in" to mortgages with rates significantly lower than currently available. More than 80 percent of California homeowners have mortgage rates under 5 percent, compared to current rates of about 7 percent. These homeowners face a significant additional financial cost to moving, further limiting the number of homes available for sale.
November data shows inflation in the US and California is trending upwards but remains lower than post-pandemic highs. Relative to the US as a whole, housing prices have grown less in California since 2020 but utility prices have grown more.
U.S. retail sales have grown 1.1 percent over the last 3 months and 2.8 percent over the last 12 months. Retail sales growth has outpaced inflation substantially over the last 3 months, but only slightly over the last 12 months.
U.S. retail sales have grown 0.9 percent over the last 3 months and 2.1 percent over the last 12 months. Retail sales growth has outpaced inflation over the last 3 months, but not over the last 12 months.
Updated Forecast In Line With Budget Assumptions. Our updated forecast is basically unchanged from last month and remains in line with Budget Act revenue assumptions. That being said, we are only two months into the new fiscal year and it is virtually certain the revenue outlook will change in the coming months. Ultimately, it would not be surprising if revenues ended up $20 billion higher or lower than our estimate for 2024-25 and $35 billion higher or lower for 2025-26.
U.S. retail sales have grown 1 percent over the last 3 months and 2.7 percent over the last 12 months. Retail sales growth has outpaced inflation over the last 3 months, but not over the last 12 months.
While recessions are not formally defined for state economies, economic data for the fourth quarter of 2022 and first quarter of 2023 appear consistent with California experiencing a mild recession. The apparent start of a recession in California last fall helps explain why the state faced a revenue shortfall in its most recent budget. How much the economy will continue to dampen the state's fiscal picture moving forward is unclear. However, the threat that the recent slowdown could persist will be a significant risk for the foreseeable future.