With epoch-defining policy shifts sweeping through the United States and the global economy, nationally recognized Cal State Fullerton economists Anil K. Puri and Mira Farka presented their insights into the current economic environment regionally and nationwide on Thursday at the 31st Annual Economic Forecast Conference presented by CSUF and the Orange County Business Council.
Puri and Farka used analogies like this year’s nostalgic movie remake “The Naked Gun” to describe the stage on which the U.S. and global economy has played out this year: plenty of mayhem (tariffs at Depression-era highs), hair-raising moments (a 23% market swoon), and near-catastrophes (a trade war escalation halted on the brink).
At the conference attended by more than 500 Orange County business leaders, the economists presented findings from their Economic Forecast Report, which outlines where the economy is headed over the next three years, and what that means for business owners and organizations. “Winds of Change,” the title of this year’s forecast, reflects uncertainty around inflation, trade policy and geopolitical risk that can cloud the economic outlook.
However, Puri and Farka argued that even as tariff negotiations and global tensions persist, markets continue to climb.
“Using the word stagflation (characterized by slow economic growth, high unemployment and high inflation) is a little bit too heavy,” said Farka, co-director of CSUF’s Woods Center for Economic Analysis and Forecasting and professor of economics. “We think we’ll get snagflation. You have a bit of inflation and a labor market that’s in a bit of a soft patch, or a snag.”
While the labor market has hit a snag, Farka said it is not unravelling. She also said that indicators that hint at a recession, like recent trends in consumers’ discretionary spending, are still doing OK.
Other areas of optimism include a continuing AI boom, corporate profits that should remain strong, European spending on defense, which should help their economies and U.S. corporation earnings (which derive 20% of earnings from Europe), and rate cuts.
The report notes that consumer spending has held up admirably over the past year — brushing off tariffs, a cooling labor market and persistent worries about the economy. Spending at U.S. retailers came in much higher than anticipated in August. Real spending has averaged 2.8% this year compared to last year’s 2.9%.
“We don’t expect a recession,” Farka said. “We’ll call it resiliency amidst anxiety.”
Puri, director of CSUF’s Woods Center for Economic Analysis and Forecasting, spoke on conditions in California and Orange County, which are “weathering hurricane-force gusts” across multiple sectors that impact quality of life. He noted the recent departure of several large corporate headquarters from the state reflect the cost and complexity of doing business in California.
Since 2020, the state — particularly Southern California — has also fallen behind the nation’s stronger pace of job creation. The report notes that the high cost of living in Southern California is a concern as labor market woes in the region extend to the labor force. Regional concerns also include high energy costs, high cost of regulations, and a recent surge in home insurance.
Farka said California’s population decreased by 0.3% over the past five years. Not surprisingly, the labor force has grown much more tepid than elsewhere. Over the past decade, the U.S. labor force expanded by 8.6%, compared with 3.6% in Orange County and 1.7% in Los Angeles County.
“Why is the labor force growth so slow? California is one of the most expensive states,” Puri said. “If you look within California, most of the jobs have come from where the housing is more affordable, such as the Inland Empire, Central Valley and Greater Sacramento area.”
Still, the U.S. economy overall remains resilient, even if the labor market is stalled and inflation is edging up. Though risks exist, the report states that the U.S. economy has muddled through and so far is coming out fine.
Meanwhile, economies of Southern California are expected to see much slower employment growth over the next two years compared to their historical trend.