The Economic and International Trade Forecast, which featured the insights of economists from the CSUF College of Business and Economics and a trade outlook presented by the on-campus chapter of the Small Business Development Center (SBDC), was held at the Richard Nixon Library on April 29. The event was attended by local policymakers, business leaders, academics and economics students.
Professor of Economics and Woods Center co-director Mira Farka called the military action in Iran that is roiling supply chains perhaps America’s “boldest, riskiest, and most consequential move since World War II.” The oil shock of the closure of the Strait of Hormuz has dwarfed prior disruptions such as those wrought by the 1970s Arab embargoes or the 1991 Persian Gulf War.
Still, assuming a baseline scenario of conflict resolution by mid-summer 2026, the Titan economists foresee a more transient impact that will avoid a full-blown recession.
“Should the conflict end soon, the dent to growth and the impending surge in inflation will likely prove a blip – a temporary shock rather than a lasting scar, and, in time, little more than a footnote in history,” explained Farka. “For now, markets appear to be pricing precisely this outcome.”
An Inflation Shock in a Decelerating Economy, with the United States Still Well Positioned
Real disposable income growth has slowed steadily in recent years while the job market has crawled along in recent months, meaning the inflationary shock comes at an inopportune time for the economy. Consumer confidence has also cratered.
Puri and Farka offer a cautiously optimistic outlook amid ongoing uncertainty, emphasizing that the United States remains the world’s dominant economic power.
“Our more upbeat outlook for a resilient – and yes, even an ultimately resurgent – economy stems from the realization that the U.S. economy has an unmatched capacity to shift, adapt, and reinvent itself more quickly than almost any other major economy,” they reported. “Our view is that the U.S. economy will weather the current global supply shock stemming from the Iran conflict with fewer bruises than most.”
First, peak tariff uncertainty is likely behind us following the Supreme Court decision in Learning Resources Inc. v. Trump. The administration will still build out the tariff wall—likely gradually, brick by brick—but the more unpredictable, ad hoc approach is less likely going forward. Tools like Sections 301 and 232 are more structured and rules-based, making the policy environment somewhat more predictable for businesses. On the artificial intelligence (AI) side of things, the expansion continues, though consensus is divided between those that fear AI will eliminate most white-collar jobs, and those who worry that overspending and overinvestment in this technology will come to naught.
Corporate earnings have also been strong recently, a powerful financial indicator.
Puri and Farka believe that the K-shaped narrative is certainly overdone. Yes, the top income levels have had a few good years, but so has everyone else. Spending is not lopsided, and the K-shaped narrative is certainly overblown.
Addressing fears of a 2008-style crash that always bedevil market analysts related to issues in private credit, Puri and Farka note a significant difference today: circuit brakers limiting exit of private credit funds, which should prevent a severe financial crisis. Also, the problem back then proliferated and mushroomed through CDOs and CDS which is not the case today.
California’s Jobless Boom
In a far cry from recent decades when the Los Angeles and Orange County regions always had low unemployment relative to the nation as a whole, Southern California in 2026 is experiencing a jobless recovery, with AI-focused strength but labor market weakness.
The state’s January unemployment rate of 5.5% is well above the 4.3% level nationally. Orange County particularly saw a net loss of 1,560 jobs last year. Tariffs have impacted import-driven sectors such as transportation and logistics and export-driven sectors such as agriculture, and the immigration crackdown have hit California hard.
“The combination of high home prices and elevated mortgage rates has pushed affordability to extremely low levels,” the economists observed. “Beyond the challenge of high home prices, insurance costs have emerged as a growing concern for homeowners in California and across the country.”
The Orange County Business Expectations Survey (OCBX), which measures the expectations of local executives, rose to 68.5 earlier this spring, up from 66 in the first quarter. Readings above 50 signify expectations of Orange County expansion.
Still, several key issues emerged as primary concerns for Orange County businesses. The ongoing conflict with Iran, rising fuel costs, persistent inflation, and elevated interest rates rank among the most pressing challenges facing local firms, reported Puri and Farka. “Together, these factors are contributing to heightened uncertainty and are likely to weigh on business activity.”
Adding to expectations of a boost in the SoCal economy are a number of sports events, including Super Bowl LV and the NBA All-Star Game being held in the state and the FIFA World Cup coming this summer. The Summer Olympics in 2028 could provide an additional tourism and infrastructure expansion.
For More on Economic Forecasts
The Woods Center for Economic Analysis and Forecasting presents twice-annual economic forecast reports as well as quarterly survey analysis and frequent updates during times of changing conditions.
For more on the Woods Center, read more of our articles on economic forecasting at CSUF.
