The UCLA Anderson Forecast reported on June 3 that the U.S. and California economies are facing a new inflationary shock, primarily due to the war in Iran and the closure of the Strait of Hormuz. This development has shifted the leading inflation threat from tariffs to rising energy prices, affecting households, businesses, and Federal Reserve policy.
According to the report, while tariff-driven inflation appeared to have peaked and labor markets began stabilizing earlier this year, higher oil prices now present a significant challenge. The forecast projects that national gross domestic product growth will remain steady at about 2.1% for 2026 instead of accelerating. Inflation is expected to reach a peak of 4.5%, with unemployment rising modestly to 4.5%. Investment in artificial intelligence, recent tax cuts, and previous fiscal support are cited as factors helping offset some negative effects from both tariffs and higher energy costs.
In California specifically, unique low-emissions gasoline requirements combined with the state’s reliance on ports and logistics create additional pressures related to elevated energy costs. While California continues to surpass national averages in output and income growth, its labor market remains weak; an employment recession identified in prior reports is forecasted to persist through at least the third quarter of 2026.
The University of California, Los Angeles has been associated with notable figures such as Nobel laureates and MacArthur Fellows; it also features a 419-acre campus supporting academic and research activities within the University of California system, according to the official website.
The full UCLA Anderson Forecast news release provides further details on these projections.
