UCLA Anderson Forecast sees resilient growth despite inflation, weak labor markets

The UCLA Anderson Forecast's September 2026 outlook finds an economy that has largely weathered a series of disruptions, with economic growth remaining resilient, even as inflation and interest rates have risen and labor markets nationally and in California remain weak.

Forecast economists expect growth to stay above 2% for the rest of 2026 and near 2% in 2027 and 2028, supported in part by investment in artificial intelligence infrastructure and consumer spending tied to rising AI-related technology stock values.

The biggest threat to that growth has shifted over the course of the year. Tariffs were the leading concern in late 2025, but the war in Iran and the resulting oil shock have since taken their place. Disruptions to oil supplies have kept energy prices high, and the Forecast expects inflation to rise again this winter, prompting another Federal Reserve interest rate increase in December. The outlook could weaken if the conflict in the Middle East drives oil prices higher or AI investment falters.

At the same time, the growth in the national economy has yet to bring stronger hiring. National payroll gains have slowed, and the UCLA economists expect unemployment to remain near 4.2%.

Similarly, although California's economy grew at an annual rate of 3.7% in the first quarter of 2026, compared with the nation's 2.1% rate, the state's unemployment rate was 5.1% in August, the highest in the country. The Forecast expects this "employment recession" to continue in California through 2026, with a recovery beginning in early 2027 as hiring in technology, aerospace and other industries picks up.

Read the full UCLA Anderson Forecast news release.