California Economy Outpaces U.S. as AI-Driven Layoffs Push Jobless Rate to 5.3%

California’s economy grew faster than the United States in recent quarters, even as its unemployment rate climbed to 5.3% in April 2026, roughly a percentage point above the national average, according to UCLA Anderson Forecast data released June 5. The AI boom is fueling investment but also triggering substantial job cuts, creating a divergence between robust output and tepid employment. The state’s GDP expanded at a 2.5% annual rate in the fourth quarter of 2025, outpacing the nation’s 2%, and early indicators suggest it maintained that lead in early 2026. Yet U.S. tech employers announced 123,653 layoffs from January through May, a 66% surge from the prior year, with nearly 77,000 cuts concentrated in California, per Challenger, Gray & Christmas data released June 4. UCLA forecasts California unemployment will peak at 5.6% later in 2026. The Iran war is adding pressure through higher fuel costs and supply-chain disruptions, dampening national GDP growth, which is projected to slow to 1.8% in 2027. Economists note the AI transition remains uncertain, with outcomes ranging from labor replacement to productivity gains.