2021-22 Fiscal Outlook Economic Assumptions

The economic assumptions underlying the main forecast in our Fiscal Outlook reflect the average of forecasts from various professional economists. Figure 1 summarizes our key economic assumptions. Overall, we assume the economy will continue to recover gradually over the next several years, remaining below pre-pandemic levels for an extended period. Statewide employment is not expected to fully recover until 2025 or later.  Overall wage and salary growth, however, is expected to snap back more quickly, reflecting, in part, that many high-wage workers have been spared from pandemic-related job losses. Housing markets, which slowed briefly in the early months of the pandemic, have seen robust activity recently. We anticipate this trend will continue into 2021, with relatively rapid home price growth and a return to normal levels of home building activity. A key driver of strong housing activity is historically low interest rates. Interest rates are expected to remain very low for the foreseeable future.