California Economy Faces Slowdown Amid Immigration Raids and Tariffs

The UCLA Anderson Forecast, released on June 18, found that tariff hikes and immigration crackdowns in major cities including Los Angeles are significantly impacting core industries such as construction, agriculture, and services. As a result, both consumer spending and business investment are declining.

The report predicts that California’s economic growth rate will fall below the national average.

Jerry Nickelsburg, professor at UCLA and lead author of the report, noted, “People are afraid to go to work. Businesses can’t calculate labor or materials costs, and consumers are delaying purchases due to uncertainty about future employment.”

The effects of tariffs are also hitting consumers and small business owners. A Korean-American resident in La Crescenta, identified as Mr. K, said, “I finally started construction on my backyard ADU that I contracted last year, but the total cost has jumped more than 20 percent. I’m taking a financial hit because tariffs have raised construction prices.”

Immigration raids and related protests are also disrupting key industries, particularly in garment manufacturing and food service.

A Korean-American garment shop owner in the LA Fashion District reported that “many workers avoid coming in due to immigration enforcement. With no one to open the store, the entire street feels frozen.”

The restaurant industry is also seeing a sharp decline. A Koreatown restaurant manager said, “We expected a boost for Father’s Day last weekend, but our sales actually dropped 25 percent from the previous week. Business was already slow, and losing a key weekend really hurts.”

Due to the strain on key sectors, unemployment in California is expected to worsen. The UCLA report projects the state’s unemployment rate will rise to 6.1 percent this year. It’s forecasted to gradually decline to 5.8 percent in 2026, 5.6 percent in 2027, and 4.4 percent in 2028.

From January to March 2025, the state lost approximately 50,000 jobs, with layoffs in the entertainment industry and major tech companies being the primary drivers.

However, those laid off may not be able to fill new jobs created in construction and manufacturing due to immigration-related vacancies. “Just because jobs are available doesn’t mean everyone can do them,” Nickelsburg noted. “Not everyone has the physical ability or skills needed.”

The report also cautioned against misinterpreting a recent short-term surge in California port cargo volumes earlier this year. That increase was driven by companies rushing to import goods before tariffs rose, and does not signal long-term recovery.