LOS ANGELES — U.S. President Donald Trump's threat to deport millions of undocumented immigrants is a risk to the California economy, according to the UCLA Anderson Forecast.
"We have a lot of sectors in California that are potentially at risk under policies floated by Trump," said Jerry Nickelsburg, a senior economist with the UCLA Anderson Forecast, during Wednesday's quarterly forecast presentation.
The threat to deport undocumented workers – a threat U.S. Attorney General Jeff Sessions has endorsed – is a risk to the forecast, Nickelsburg wrote in his forecast report.
"Were this to occur, there could well be a significant reduction in the production of food, in food processing, particularly the slaughter and preparation of meat products, in garment manufacturing and in residential construction," Nickelsburg wrote.
This is a risk that "we will be monitoring closely and if the policies become more of a reality, it could lead to a downward revision of the forecast," Nickelsburg said.
Construction, science and technical, transportation & warehousing, agriculture, and manufacturing could all be impacted by placing tariffs on trading partners, he said.
The threat of deportation already has resulted in farmworkers not showing up for work, said John Krist, chief executive officer of the Farm Bureau of Ventura County.
Changes to the Affordable Care Act could harm non-profit hospitals and local governments, Nickelsburg said.
Hospitals in the state had been growing as a result of the increase in insured patients, but also because the state has a growing elderly population. Changes to ACA could turn the tide on that growth, he said.
Of the 14.1 million covered through Medi-Cal, the California version of Medicaid, in 2016-17, 3.8 million were covered as a result of the ACA expansion of state Medicaid programs. About 2 million Californians have bought private insurance through the exchange.
California could lose $15 billion in federal funding if the Medicaid expansion under ACA is repealed, according to the state's Department of Finance.
The quarterly forecast presented by the trio of forecasters was largely positive for California, but some Trump policies loom over the state like a black cloud. The inland areas of the state were slower to recover from the Great Recession than the coastal areas, but those areas are now catching up, Nickelsburg said.
Employment is expected to grow 2.1%, 1.2% and 0.9% each year through 2019. The state's unemployment rate at 5.4% in 2016 is expected to fall to 4.6% by 2019.
Economist David Shulman said they have not "modeled in serious trade disturbances with our major trading partners and a reduction in the labor force caused by significant changes in deportation policies. Nevertheless, those risks are rising."
A restriction on H1-B visas for highly-skilled immigrants could negatively impact Silicon Beach, a concentration of technology companies along the Los Angeles coast, said Mary Leslie, president of the Los Angeles Business Council.
The twin ports of Los Angeles and Long Beach are major economic drivers for Southern California, according to the economists. The inland areas west of Los Angeles are populated with fulfillment centers and warehouses where goods are stored and repackaged before being transported to other areas of the country.
"We don't have good answers at this time," Nickelsburg said, "because all of the change in policy could be a show for the President's base; a demonstration that he meant what he said in the campaign."
Nickelsburg pointed to Trump's backing off of the policy of deporting those who fell under the Deferred Action for Childhood Arrivals immigration policy started by the Obama administration in June 2012. It allows certain undocumented immigrants to the United States who entered the country as minors to receive a renewable two-year period of deferred action from deportation.
"The President been saying lots of things last two months," Shulman said. "One thing, he talked about during the campaign that he hasn't talked about in the last two months is China. If he isn't talking about China, I don't think we will have a trade war."
The $500 billion in tax cuts proposed by Trump are likely to cause short-term growth, but will fade as the economy bumps against its full employment ceiling, Shulman said.
Shulman's U.S. forecast anticipates 2.4%, 3% and 2.2% each year through 2019. But real growth is expected to trail off on a quarterly basis in 2019 as higher interest rates weigh on the economy.