ITEM 15 ATTACHMENT 1 - Laserfiche WebLink

The Current Economic Climate Federal There appears to be a high degree of unpredictability and uncertainty based on policy discussions and implementation by the current U.S. administration and the potential effect on economies, supply chains, and credit conditions globally. Front -loading of regressive policies, including higher tariffs and federal workforce layoffs, is disrupting growth, and the overall macroeconomic conditions are projected to slowly deteriorate without changes to the current policy direction. Forecasts suggest real GDP growth will be at 1.9% in 2025 and 2026, down from 2.9% in 2023 and 2.8% in 2024. A weak growth in household income, reduced positive impulses from the public sector, higher interest rates, and lingering policy uncertainty are some of the key factors contributing toward a decelerating economic growth in 2025. Negative sentiments have been growing among economists, in terms of both the inflation expectations, as well as the probability of a U.S. recession over the coming year. Any type of slowdown in the broader economy will trickle down and impact the local economy. State In January 2025, the Governor released his proposed FY 2025/26 budget, projecting a small positive balance of $363.0 million after two years of state budget deficits with the use of $7.1 billion in reserves. The Governor's proposal projects $16.5 billion in additional revenue compared to estimates from last June. The state administration's revenue projections reflect an economic outlook that expects moderate growth to continue in the near term. However, the administration also warns that federal policies, international trade, and immigration would increase inflationary pressures on the economy, which would dampen economic growth and reduce state revenues. Local The East Bay has a strong reputation as a highly productive, dynamic, and innovative economy with a skilled and educated workforce. Pleasanton's economy, along with neighboring cities and the greater San Francisco Bay Area, faltered during the pandemic but has substantially recovered. The local unemployment rate was under 3.0 percent as recently as 2022 but has increased to 4.3 percent as of February 2025 compared to 4.4 percent for Alameda County. These percentages are lower than California's rate of 5.4 percent as of February 2025, reflecting a robust local and regional economy in the San Francisco Bay Area. Pleasanton's housing values, following the regional trend, peaked in spring 2022 and decreased throughout the year before increasing again through 2023 and 2024. The median sales price of $1.6 million is 10.2 percent higher year -over -year, but due to the small number of homes sold, the median sale price can fluctuate significantly. With higher mortgage interest rates and high home prices, housing activities are expected to remain sluggish in 2025.