The UCLA Anderson Forecast reported on June 3 that the United States economy is facing a new inflationary shock, driven by the war in Iran and the closure of the Strait of Hormuz. The report states that after previous tariff-driven inflation began to subside and labor market conditions stabilized, rising energy prices have emerged as a significant source of pressure for households, businesses, and the Federal Reserve.
According to the forecast, while the national economy remains relatively resilient, this latest oil shock has now overtaken tariffs as the primary threat to inflation. Gross domestic product growth is expected to remain steady at approximately 2.1% in 2026 rather than increase. Inflation is projected to peak at 4.5%, with unemployment anticipated to rise modestly to 4.5%. The report attributes some mitigation of these pressures to ongoing investment in artificial intelligence, tax cuts, and earlier fiscal support measures.
In California specifically, the same energy shock presents additional challenges due to unique low-emissions gasoline requirements and reliance on ports and logistics sectors within its economy. Although California continues to surpass national averages in output and income growth, its labor market remains weak. The employment recession described in previous reports is expected by UCLA Anderson Forecast analysts to persist through at least the third quarter of 2026.
The University of California, Los Angeles has been associated with Nobel laureates and MacArthur Fellows; it maintains a history of excellence across scholarship, arts, and athletics; fosters diverse perspectives through academic programs; operates a 419-acre campus; and functions within the University of California system, according to the official website.
Further details can be found in the full UCLA Anderson Forecast news release.
