Local businesses, academics and political leaders gathered Thursday afternoon in Irvine for the 30th Annual Economic Forecast hosted by the Orange County Business Council and the Cal State Fullerton College of Business and Economics.
Titled “The ‘Vibes’ Economy: Outlook for Growth and Inflation Amidst Election Uncertainty,” the presentation was characterized by a feeling of cautious optimism that a recession has been avoided for now, but the path to full recovery still has a long way to go.
Anil Puri, provost emeritus and director of the Woods Center for Economic Analysis and Forecasting, offered his expertise in economic forecasting to the audience.
“What we see in the economic world right now is a lot of dissonance, a lot of divergence between hard data and sentiment, between theory and practice. So a lot of the old models, some of them don’t seem to work,” Puri said, beginning his presentation.
Amongst the many economic indicators discussed at the conference, gross domestic product growth exceeded expectations, growing at an average rate of 2.8% over the past two years and 3.2% in the last year.
Furthermore, consumer price index inflation currently sits at 2.6%, the lowest figure since March 2021.
However, these figures do not paint the full picture.
Speaking at the conference alongside Puri was Mira Farka, a professor of economics at CSUF and co-director of the Woods Center for Economic Analysis and Forecasting. She described the current state of the economy as a story of two different experiences.
“Think of a big ship, where basically the upper decks are doing fine, but there’s turbulence in the lower decks and it’s precisely this bifurcation of the U.S. economy, this sort of tale of two Americas that drives our outlook,” Farka said.
Farka went into further detail, speaking on those whose outlook on the economy is not nearly as positive and why current sentiments contrast the data.
“Household wealth is through the roof since the pandemic,” Farka said. “True, but if you look underneath the numbers, households at the bottom 50% of income distribution, for them wealth has only gone up by $1.8 trillion since 2019. That’s the lowest in one generation.”
Following the Federal Reserve’s raising of interest rates two years ago, the current state of the economy has been described by both speakers as a “soft landing.” That is to say, previous forecasts offered a much darker outlook. Nonetheless, the consensus from the Fed is that a recession has been avoided with notable caveats.
“We do think that in the long run, the Fed will probably fail to deliver and will only deliver half of the soft landing story,” Farka said. “They are probably going to avoid a recession, but it’s probably going to be harder to bring down the 2% on target inflation. So we actually call this a soft landing with an asterisk.”
With a pivotal presidential election just weeks away, uncertainty surrounding it has also played a role in the decisions people are making that are affecting the economy.
More specifically, regarding economic policy, both former President Donald Trump and Vice President Kamala Harris vary in key ways, from Trump’s push for more tariffs on Chinese products to Harris’ proposals for raising taxes on corporations.
“So if you have uncertainty in terms of what policy direction you are going to be facing, you are going to be more hesitant to make the investments that you would normally make if you had more confidence in where policies were going,” said Jeffrey Ball, president and CEO of the Orange County Business Council.
Farka also noted that while businesses tend to be a bit more cautious in election years, this election is unique in different ways.
“On average, the firms do hold back and figure out who is going to win, leave the uncertainty behind and move on,” Farka said. “The bad news is that what we’re seeing this time that is a bit unusual, is because the election is so tight.”
In addition to the presidential election, ballot propositions such as Proposition 32, a proposal to raise the minimum wage to $18 an hour, and Proposition 33, a proposal to expand rent control legislation, will be decided upon by voters. These measures propose significant changes, though Puri says predictions cannot be confidently made until after these policies are passed by voters.
“We analyze these propositions after they pass, not before,” Puri said. “I don’t think they have any macro impacts, most of these, other than perhaps [Proposition 33] which gives local governments the authority to control rents.”
The next economic forecast hosted by the College of Business and Economics is scheduled for April 25, 2025 and will once again be led by both Puri and Farka.