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Updated "Big Three" Revenue Outlook May 9, 2025
Strong Growth This Year, Muted Expectations Moving Forward. Our updated forecast anticipates revenues from the state’s three largest taxes will post strong growth in the current fiscal year. Moving into the budget year, however, our revenue forecast is essentially flat, reflecting mounting risks and headwinds. Total collections across the budget window roughly match the assumptions in the January Governor’s Budget. The timing of those collections, however, is somewhat different, with more revenue attributed to the prior and current years and less revenue expected in the budget year.
California New Car Registrations: March 2025 May 9, 2025
Seasonally adjusted new car registrations grew 5 percent from February to March. With this strong growth, March was the fourth highest monthly count of registrations in the last two years. As we track data for the next few months, we will see if this growth continues or if it was a transitory bump in anticipation of tariffs.
Monthly Jobs Report April 21, 2025
California's traditional jobs report suggests the state shed 12k jobs in March, and the prior month's report was revised down from -7k to -22k jobs. The state's traditional jobs report has shown a net job decline of 55k jobs over the past three months. In contrast, employment numbers from a secondary source, a household survey, have been somewhat more stable. Our hybrid measure that incorporates the household survey and has more closely tracked final jobs data suggests the state has lost 6k jobs over this period.
California Housing Affordability Tracker (1st Quarter 2025) April 21, 2025
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.
Inflation Tracker April 21, 2025
March data for the US show annual inflation was similar to pre-pandemic averages. This follows higher inflation readings in January and February, especially in California. Between December 2024 and February 2025, consumer prices grew at an annualized rate of 5.1% in California and 4.2% in the US. Recent surveys suggest that consumers expect significantly higher inflation over the next few years.
California New Car Registrations: February 2025 April 8, 2025
Starting with this post, we plan to publish monthly updates on new car registrations in California, which can be a useful, timely economic indicator. From December 2024 to February 2025, seasonally adjusted new car registrations declined by 8 percent. December registrations, however, had been the highest since mid-2022. As a result, February registrations still were around the average level over the last couple of years.
U.S. Retail Sales Update: October 2024 November 15, 2024
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 Update: August 2024 September 17, 2024
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.
U.S. Retail Sales Update: July 2024 August 16, 2024
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.
Did California Enter a Recession Last Fall? October 3, 2023
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.