A study released by the UCLA Anderson economists sums up California’s economic outlook for early 2026 as: “Both the nation and the state are poised to muddle through early 2026 before experiencing stronger growth in 2026 and 2027.”

That phrase—“muddling through”—captures a divided economy where AI-driven optimism collides with tariff-induced uncertainty and a weakening labor market, according to the study.

Another survey by George Mason University's Mercatus Center , a libertarian, free-market-oriented non-profit think tank, found the national economic landscape similar to California's: productivity gains from AI will help offset weak job creation, but inflation and trade uncertainty remain stubborn challenges.

Jobs: A tale of two Californias

The report highlights a stark split: “I

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