Overview
- AI-related capital spending in 2025 has exceeded $405 billion and is expected to be reinforced by the One Big Beautiful Bill Act’s stimulus.
- Tariffs are projected to push inflation to about 3.5% at an annualized rate in early 2026, with the U.S. jobless rate seen near 4.5% by year-end and long-term rates hovering around 4.0%–4.4%.
- California’s economy remains bifurcated, with AI, aerospace and advanced manufacturing expanding as construction, nondurable goods, retail, and leisure and hospitality face sustained headwinds.
- The state logged payroll job losses in the first eight months of 2025 and has kept unemployment above 5% for more than 19 months, with a peak near 5.9% expected early next year before improvement later in 2026.
- Forecast authors cite early county data linking deportations to rising local joblessness and housing bottlenecks, note subdued building permits, flag elevated policy uncertainty including a possible Supreme Court ruling on tariff authority, and point to a late‑2026 recovery.