As economist Anil Puri addressed a gathering of policymakers, business leaders and academics, the former dean of the College of Business and Economics at Cal State Fullerton didn’t mince words when providing his in-depth analysis and three-year outlook for California’s economy at the recent Economic Forecast Conference.
Puri, who serves as director of the university’s Woods Center for Economic Forecasting, and economist Mira Farka, who serves as co-director, presented their forecast for global, U.S., California and Orange County economies on Oct. 30 at the Hyatt Regency Hotel in Irvine.
“The state’s problems are not isolated incidents; they are deeply interconnected,” said Puri and Farka. ”This nexus spans climate change, wildfires, high insurance costs, elevated oil prices, constrained energy supplies and strict environmental regulations.”
The state’s reputation as an economic powerhouse is under threat, Puri said, as evidenced by a wave of corporate departures and rising housing costs.
Many major companies, including Chevron, Oracle, Tesla, SpaceX and McKesson, have moved their headquarters out of California over the past three years, Puri noted.
The departures stem from significant regulatory burdens on the state’s businesses compared with the U.S. as a whole, Puri said.
Economies of Southern California are expected to see much slower employment growth over the next two years compared with their historical trend, Puri and Farka noted in their report.
Economic growth in Orange County is projected at 0.38%, well below its historical average, the economists said.
“Many of the troubles are of its own making,” Puri said. “And there are other areas where the federal government’s actions are making it worse.”
Despite some anxieties, Farka predicts steady GDP growth at the national level, in part, due to AI, which contributes to nearly half of U.S. GDP growth this year.
“AI alone has contributed, almost half of U.S. GDP growth this year,” Farka said. “We do think this trend is going to continue.”
But in California, the statistics create a different picture.
California’s GDP has grown 34.1% since 2015, while Texas has surged ahead with nearly 50% growth, which speaks to the majority of new jobs in the Lone Star State.
The negative trends are not going unnoticed, as three-quarters of Californians expect tough times ahead and half are alarmed by relentless price increases, according to a survey from the Public Policy Institute of California.
“California residents are not happy,” Puri said. “They are in a sour mood. The majority feel that the state is going in the wrong direction.”
And with median home prices topping $1.4 million statewide and $930,000 in Los Angeles, affordability is out of reach for many.
California is not building enough homes, Puri said, and minor legislative efforts are doing little to solve the housing crisis.
“They’re not going to make a huge dent in the housing market,” Puri said. “And the homelessness problem that we have in California as a whole, especially in LA.”
Utility bills are also a major concern, with California’s oil production at a historic low.
Gas prices in the state are also about $1.50 higher than the national average.
Additionally, California ranks 45th in the nation in job opportunity growth since 2020, and population growth is slow due to net out-migration, according to the economists.
The big culprit is net out-migration,” Puri said. “People moving out of the state versus in the state. More people have been moving out, and that is the cause.”
“Construction, agriculture, hospitality, retail sector, they all are dependent on this workforce,” the economist said. “And so, the question is, when you reduce the immigrant population, who’s going to do all these jobs?”
California’s structural issues related to housing and the labor supply intersect with major national policy shifts such as implementation of tariffs, immigration crackdowns and investment in AI technology, creating a more fragile outlook for California compared with the broader U.S. economy.
During the first 10 months of 2025, about 450,000 people have been deported, Farka said.
Farka pointed out that the Congressional Budget Office is projecting that over the next few years, there will be a significant decline in immigrants added to the labor force.
And keeping unemployment steady depends on immigration flows, she said, because fewer immigrants mean fewer jobs are needed, but also less vitality in the labor market.
“If immigration is going to be a million people … we need about 120,000 jobs per month,” Farka said. “If it’s 400,000 like we had this year, we need 50,000. If you have no immigrants, all you need is 30,000.”
In California, the immigration decline hits hard.
“California’s reliance on immigrant labor in sectors like agriculture, health care and technology means that reduced inflows hit harder here than nationally,” Puri said, “especially when housing costs already discourage workers from staying.”