Cal Lutheran Forecasts Narrowing of State’s ‘Growth Premium’

The U.S. economy will grow an average 2.2 percent during the next two years with California’s economy faring better for the next few quarters, according to California Lutheran University’s Center for Economic Research and Forecasting. The Thousand Oaks research center said California has enjoyed a “growth premium” compared to the rest of the nation, but that will narrow over time and by 2019 will be negligible. According to the center’s analysis, Southern California in particular has average GDP growth of 2.7 percent between April 2012 and December 2016, about 90 basis points higher than the U.S. average. During 2017 that growth slowed considerably. Although the 2.2 percent national growth is a slight upward revision from previous forecasts, “it in no way signals a regime change whereby the U.S. economy has broken free of the pattern of anemic growth,” the report stated. The center noted that if tax reform reduces U.S. corporate taxes from 35 percent to 21 percent, it would benefit most workers. Also, “the Federal Reserve’s interest-on-excess-reserves policy will continue to constrain economic growth until the policy is ended,” the report stated.