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President Trump’s trade war and recent immigration attacks are expected to provide a one-to-two punch to California’s economy.
A new report by UCLA Anderson forecast predicts that the state’s economy is likely to contract later this year due to the radioactive falls caused by global tariffs and immigration attacks in other cities rattling key sectors such as Los Angeles and construction, hospitality and agriculture.
The quarterly forecast released on Wednesday characterized the second quarter of this year as a “period of substantial volatility and uncertainty” driven by “dramatic policy changes and financial market (over) reactions.” The report suggests that California’s economy will be slower than this year’s country.
Jerry Nickelsberg, director of Anderson Forecasts and author of the California State Report, said “confusion and uncertainty” about the development of both immigration and trade policy “will have a negative impact on California.”
“People are afraid to go to work, because companies don’t know what their cost structure is because families who may be thinking about buying a home are not very sure about their future or short-term future employment situation,” Nickelsburg said in an interview. “You have a wide range of decision paralysis in terms of investing in consumption and labor decisions. It will be resolved [once] It’s even clearer about what the US government’s long-term policies are. ”
The report details sectors affected by deportation, including food processing, agriculture, healthcare, social services, retail, leisure and hospitality.
It also affects construction, an industry where demand has increased due to fire recovery and reconstruction work and efforts to mitigate the state’s housing crisis.
Construction is becoming more tariff-risky because the source of building materials includes significant levels of imports from China, Mexico and Canada.
While traffic at state ports, often considered a measure of California’s economy, has skyrocketed this year, forecasters say it reflects attempts to bring goods into the country before higher tariffs are imposed.
Forecasters also predict that the state has negative employment growth for several quarters, with California’s unemployment rate peaking at 6.1% this year.
If migrant raids continue to reduce the amount of workers in these sectors, employment in key sectors such as construction and manufacturing may be in high demand, but Nickelsburg said they will likely not face unemployment.
“The fact that California’s unemployment rate is rising doesn’t mean that those people can now go to build,” he said. “They may not have the right skills. They may not have the physical strength and stamina. They may not be able to do it, and they may be truly indifferent to such a job.”
Some of the factors that contribute to unemployment include declining employment in the entertainment industry and cutting backs by large technologies, according to the report.
The average unemployment rate in 2025 is expected to be 5.8%, with a decline of 5.6% in 2026 and 4.4% in 2027.
During the first four months of the year, California lost 50,000 payroll jobs, with unemployment rates above 5%.
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