CALIFORNIA STATE – California is starting 2026 in a mixed-but-stable spot: job growth has been choppy, inflation has cooled from peak levels but is still noticeable, housing affordability remains historically tight, and state revenues are coming in stronger than forecast even as budget deficits linger.
Quick disclaimer: we are journalists, not financials advisors or realtors. Nothing in here should be considered financial advice. Consult a professional advisor before making any financial decisions.
1) Jobs: Unemployment is elevated, but hiring has not collapsed
California’s unemployment rate was 5.5% in November 2025, and employers added 32,500 nonfarm jobs that month, according to the California Employment Development Department (EDD). (Employment Development Department)
One wrinkle: late-2025 labor-market reporting has had unusual disruptions because of the federal government shutdown and data-release delays, which can make month-to-month comparisons noisier than normal.
2) Growth: Forecasts point to a slow start, then firmer momentum later in 2026
UCLA Anderson’s economists have described California (and the U.S.) as likely to “muddle through” early 2026, with stronger growth later in 2026 and into 2027, rather than an immediate boom or bust. (UCLA Anderson School of Management)
On the state side, California’s Department of Finance published updated U.S. and California economic forecasts in January 2026, which are often used as the baseline for state budgeting assumptions. (California Department of Finance)
3) Inflation: Still a pressure point, even if it is far below the worst of 2022-23
For a real-world read on what Californians are feeling, the BLS regional CPI for Los Angeles-Long Beach-Anaheim showed 3.6% inflation over the 12 months ending November 2025 (with core inflation at 3.4%). (Bureau of Labor Statistics)
That is not “back to 2%” yet, but it’s a very different environment than the peak-inflation period — and it matters for everything from wage negotiations to consumer spending.
4) Housing: 2026 is expected to be slightly better, but affordability stays near the floor
The California Association of Realtors (C.A.R.) expects the statewide median home price to rise about 3.6% to $905,000 in 2026, with existing single-family sales up about 2%. It also forecasts affordability ticking up to 18% in 2026 (still extremely low). (California Association of Realtors)
Recent C.A.R. affordability reports underscore how tight the market remains: in Q3 2025, only 17% of California households could afford the median-priced home. (California Association of Realtors)
5) State finances: Revenues have improved, but deficits are still part of the picture
Budget headlines going into 2026 have been about persistent, multi-year shortfalls. Newsom’s administration has described a roughly $2.9B to $3B gap for the upcoming fiscal year, while other state fiscal analysts have warned about materially larger deficits depending on assumptions about markets and revenue volatility. (AP News)
At the same time, California’s own Department of Finance reported that General Fund cash receipts were running above forecast early in the 2025-26 fiscal year, driven largely by personal income tax receipts. (California Department of Finance)
Translation: “the economy” can look okay in some data (income-tax flows, high-end wealth effects) while the state budget still feels squeezed because California’s revenue base is unusually sensitive to markets and high earners.
6) The “two Californias” dynamic is still real
A useful way to understand 2026 is that not everyone is experiencing the same economy:
- Asset-driven segments (high-income households, some AI-adjacent tech, luxury real estate) can look strong when markets are strong.
- Rate-sensitive and cost-of-living-sensitive households feel the drag from elevated housing costs and still-sticky everyday inflation.
Even within housing, coverage has highlighted a luxury-market surge alongside weaker conditions in other tiers (like parts of the condo market). (San Francisco Chronicle)
Bottom line
Early 2026 looks like a slow-growth, high-cost environment rather than a crisis: unemployment is higher than Californians got used to in the late-2010s/early-2020s, but forecasts generally point to stabilization and firmer growth later in 2026, while housing affordability remains the biggest day-to-day constraint for families and workers. (UCLA Anderson School of Management)
