California’s economy is anticipated to shrink due to two reasons
(MENAFN) California's economy is projected to shrink later this year due to increasing tariffs and intensified immigration enforcement actions, according to a recent economic outlook. These developments have disrupted supply chains, created unease among businesses, and discouraged potential workers from participating in the labor market.
The summer forecast, released by a university research group, anticipates that the state’s unemployment rate will peak at 6.1 percent in the final quarter of the year. It is expected to decline gradually to 5.8 percent in 2026 and further to 4.4 percent in 2027. So far in 2025, California has already lost around 50,000 jobs, pushing its unemployment rate up to 5.3 percent—over a full percentage point higher than the national figure.
As stated by reports, “Confusion and uncertainty about both immigration and trade policy have a negative economic impact on California.” The source explained that companies are hesitant to invest, hire, or spend without clarity on policy direction, leading to a general state of inaction across multiple sectors.
Major drivers of California’s economy—such as the tech industry, manufacturing of long-lasting goods, freight and shipping, and entertainment—are either under pressure or in decline. The research highlights that higher tariffs are raising production costs and limiting international sales opportunities. Meanwhile, immigration raids in cities like Los Angeles have shaken labor-heavy sectors including agriculture, hospitality, and construction, all of which rely
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