SCAG Economic Roundtable Update

Third Quarter, 2025

The SCAG Economic Roundtable met for its third 2025 quarterly discussion on Aug. 21. Highlights included:

• Job growth in the region continued to be modest and narrow. There appear to be no major layoffs or job losses region-wide, though only the Healthcare and Social Assistance sector is growing significantly.
• While effective tariff rates currently sit at 18.6 percent, a majority of the burden is being absorbed by corporations and has not hit consumers. Impacts of tariffs—as well as federal funding cuts to Medicaid and research remain major longer-term concerns.
• 28 percent of the SCAG region’s construction labor force is made up of undocumented immigrants—this (and other) sectors are being disrupted by increased enforcement action.
• Expansive California Environmental Quality Act (CEQA) exemptions show promise for reducing some procedural roadblocks for urban infill projects statewide. While housing production has been sluggish in 2025 and 12,971 residential units were lost in LA County ‘s January wildfires, these exemptions provide a meaningful policy lever for boosting supply. 

More detail can be found in the report that follows. Supporting data are available on the SCAG Economic Trends Tool.

Job Creation in the SCAG Region is Modest and Narrow

Jobs grew by 52,900 in the 12 months ending July 2025 in the region. This job growth improves on last quarter’s numbers, but at an annualized growth rate of 0.6 percent—based on the Current Employment Statistics (CES) survey—last quarter’s job growth is still fairly weak compared to prior years.

Job growth continues to be limited and concentrated only in two sectors: Healthcare and Social Assistance and Local Government.

• If it weren’t for Healthcare and Social Assistance, the region would’ve lost about 26,000 jobs over the last year.
• An aging population and an expansion of specialty care is boosting this industry. Major investment includes two major new healthcare facilities in Orange County: City of Hope Orange County and UC Irvine Health, Irvine campus. The new $1 billion expansion of Hoag Health System and several other healthcare projects in Orange County provide additional evidence of strength in the sector.
• Meanwhile, many community and independent hospitals in the region, and those relying more heavily on Medicare and Medicaid reimbursement, are struggling and at severe risk due to federal funding cuts. 

While new job creation is relatively weak and unemployment rates have ticked up (partly caused by seasonal effects), there are few new unemployment insurance claims—suggesting that the currently weak job market is not characterized by large, disruptive layoffs or lob losses. 

• Weak job creation in several higher-paying sectors (e.g., advanced manufacturing, film and sound recording, software development, professional business services) continues to suggest that artificial intelligence (AI) might be a culprit.

What’s Happening Outside the Region

Tariffs increased substantially, but the economy-wide price impacts remain muted.

• Effective tariff rates are currently sitting at 18.6 percent, according to the Yale Budget Lab. Nonetheless, a recent Goldman Sachs  report found that about 60 percent of the burden so far is being absorbed by importers or exporters. This burden is likely unsustainable over the long term.
• The Yale Budget Lab estimates the impact of tariffs would be equivalent to a loss of $2,400 in household income on average. The potential impact reduces to $2,100 if households substitute less expensive goods for those affected by tariffs. Further, only 34 percent of consumption spending is for goods—the majority is for services, which are not directly tariff-impacted.
• Imports and exports are a fairly small share of American Gross Domestic Product (GDP)—each under 11 percent in Q2 2025. While randomness and uncertainty surrounded the development of the administration’s tariff policy, moderate and consistent tariffs would not be economically devastating. GDP growth would be marginally lower, inflation would likely be slightly higher (it currently remains above Federal Reserve targets), and consumer sentiment would be weakened (which is the case, according to the University of Michigan’s Consumer Sentiment Index).

Expect some knock-on effects from federal funding decisions.

• Federal funding cuts have severely impacted social services and gap-coverage programs. Many nonprofits, quasi-governmental agencies, and governmental agencies have seen severe budget cuts and increased restrictions on eligible uses for funding. Smaller nonprofits providing critical social services have also seen their operating and programmatic budgets severely diminished.
• Universities have lost substantial amounts of research funding—initially at private institutions, but increasingly at public universities as well. This includes medical research at university-affiliated hospitals. The long-term consequences are of great concern.
• While private research and development, e.g., in the technology sector, might be able to absorb some of the slack, this is a laborious process, and recent investment has been more likely to be directed toward AI.

Tourism deserves a close watch.

• Theme park attendance and hotel occupancy rates in destinations like Orange County and the Coachella Valley were generally strong relative to expectations over the summer.
• However, there are concerns that the strong hotel occupancy rates reflect a temporary boost from local summer vacations and might evaporate by Fall without being replaced by international visitors, who stay longer and spend more. A decline in international visitors would have knock-on effects on sales tax receipts and related industries.
• Leisure and hospitality employment has dropped in some parts of the region: down 0.9 percent year-over-year in Orange County and 0.4 percent in the Inland Empire, while Los Angeles was essentially flat (+0.3 percent) as of July.

Immigration enforcement expected to impact key local sectors.

• From May through July 2025, the rate of U.S. Immigration and Customs Enforcement (ICE) arrests in L.A. County was roughly five times higher than the prior year, according to the Deportation Data Project.
• The most recently available American Community Survey data (processed by USC’s California Immigrant Data Portal) indicate that undocumented immigrants account for 34 percent of L.A. county’s construction workers and 28 percent across the SCAG region. Undocumented immigrants account for an estimated 23 percent of food preparation workers in L.A. County and 19 percent region-wide.
• In 2024, the roundtable noted that higher-than-expected immigration had buoyed job growth despite otherwise very slow labor force growth. Looking forward, given the volume of exposure, both apprehension and the fear of apprehension are expected to significantly disrupt major sectors in the region.

Broad CEQA exemptions introduced by recent legislation.

• While not an overhaul of CEQA, recently enacted changes via Assembly Bill (AB) 130 and Senate Bill (SB) 131 represent the most expansive set of exemptions introduced to date. Though the concrete impacts are yet to be seen, the signaling value of these reforms is significant.
• Under AB 130, most urban infill projects up to 20 acres are now exempt from environmental review under CEQA. Qualifying projects would be exempt from environmental review, and therefore litigation risk, over possible impacts like local traffic, air pollution, flora, fauna, and noise levels.
• In addition to housing, SB 131 includes a suite of CEQA exemptions for community-serving and infrastructure projects.
• These bills are meant to significantly reduce CEQA delays, particularly for housing. In the short term, however, cities, counties, and state agencies are likely to experience a higher caseload as they navigate the new rules. The construction sector also has experienced persistent labor shortages that have recently been exacerbated by ICE actions.
• In the longer term, investors will likely remain cautious until there’s greater clarity on how the revised standards will be applied. Macroeconomic and regional uncertainty are reinforcing hesitancy. Clean-up legislation is anticipated to address remaining ambiguities and implementation gaps in the reform package.

What’s Happening Inside the Region

Imperial County

• Unemployment in Imperial County reached 20 percent as of July 2025, the highest in over a decade, except for the early days of the pandemic shutdown. The county’s job losses are caused, in part, by the closure of a major employer: Southern Minnesota Beet Sugar Cooperative is closing the Spreckels factory in Brawley, laying off 394 workers and resulting in about 300 additional jobs lost due to 23,000 acres of sugar beets no longer being farmed.
• One of Imperial County’s two state prisons was under review for closure this year. While the closure was averted, with about one in 20 local jobs tied to the prison system, the state’s decision on prison closure has implications for the county’s employment outlook.
• Developers are moving quickly on solar and battery projects to qualify for the Investment Tax Credit. New Internal Revenue Service (IRS) rules take effect on Sept. 2, 2025. Projects must begin construction and maintain continuous progress within a four-year window and must be operational by the end of 2030 to qualify for the available tax credits.

Los Angeles County

• 12,971 residential properties were destroyed in the Palisades and Eaton fires in January 2025. While the impact on the county and regional economy is not excessive, the fires’ impact on the area is still overwhelming.
• Debris removal has largely been completed (more quickly than expected) and between 200-300 new housing unit permits have been issued by both the city and the county of Los Angeles.
• Building on the March roundtable report, an updated likely case scenario for rebuilding across both fire areas is:
  • First homes completed: December 2025
  • 10 percent of homes completed: December 2026
  • 50 percent of homes completed: January 2029
  • 85 percent of homes completed: June 2033
• Several factors could slow the pace, including the speed of permitting, higher materials costs due to tariffs, labor shortages due to immigration enforcement, and property sales—original owners are more likely motivated to rebuild quickly.

Orange County

• The only county in the region with higher housing production in 2024 than in the prior year also saw a somewhat unexpected increase in its labor force over the past 12 months—reflecting strong and balanced development pipelines in labor, housing, and commercial/institutional.
• Drone and autonomous vehicle technologies are setting up to become a true cluster of their own. Anduril, an anchor company in the industry, has been receiving substantial defense department contracts.
• Healthcare remains a key growth sector, driven by an aging population and substantial investment in medical facilities in the county.

Riverside and San Bernardino Counties

• The unemployment rate in the Inland Empire was 6.4 percent in July, which is higher than the prior month and a year ago. However, the labor force has been growing relatively fast, up 7 percent relative to just before the pandemic in February 2020, compared to a 1.1 percent increase for California and a 3.6 increase nationally.
• Nonfarm jobs rose 1 percent year to year in July 2025, a gain of 17,000 positions, led by healthcare, which added 15,300 positions. Seven of 17 major industries added jobs while the remaining industries were flat or lost jobs compared to last year.
• Multi-family housing production in San Bernardino County is nearly four times as high in 2025 compared to the same period in 2024—a rare bright spot, as overall regional housing production has dipped considerably since 2023 and sales levels remain near historic lows.
• The Inland Empire is not immune to the broader trend of an aging population. Baby boomers are leaving the labor force and school enrollments have declined in many communities.

Ventura County

• Ventura County’s total employment dropped by 700 in the 12 months ending July 2025 (-0.2 percent).  Without the growth in Healthcare and Social Assistance, the county’s employment would’ve shrunk 1.0 percent, mirroring the region’s trend, but with slightly lower and narrower growth.
• Despite this, Ventura county’s population grew by 822 people in 2024—the first year it grew by more than 200 people since 2015.  Population gains were seen in the Cities of Ventura and Santa Paula and unincorporated areas—unsurprisingly, the three jurisdictions with the largest percentage gains in housing.
• After reaching an all-time high in 2024, Port of Hueneme cargo volumes through June are down 7.4 percent compared to a year prior.  The Port is heavily dependent on automobile imports and is especially sensitive to this industry.