California’s economy continues to outpace the nation in growth, but the benefits are unevenly distributed. The state’s unemployment rate reached 5.3% in April — roughly 1 percentage point above the national rate — and is expected to peak at 5.6% later this year, according to the UCLA Anderson Forecast. In Los Angeles, gas prices have surged past $6 a gallon, compounding cost-of-living pressures on working households and creating a paradox of macroeconomic strength alongside widespread financial strain.

Growth and Layoffs Side by Side

The paradox is stark. California’s real GDP growth reached approximately 2.5% last year, outpacing the national rate of around 2% and driven in large part by the AI boom that is attracting hundreds of billions in corporate investment, much of it concentrated in the Los Angeles and Bay Area corridors. Yet from January to May 2026, U.S. tech employers announced 123,653 job cuts, up 66% from the same period a year earlier, according to Challenger, Gray & Christmas. California accounted for close to 77,000 job cuts across all sectors — double the number of any other state.

The Iran War Effect

The ongoing conflict with Iran has amplified California’s economic vulnerabilities. The state uses pricey low-emissions gasoline and depends more heavily on imported oil than most states, making it especially sensitive to supply disruptions. Gas prices in Los Angeles exceeded $6 a gallon in early June, a level that directly impacts consumer spending, logistics costs, and the operating margins of businesses that depend on transportation. The UCLA forecast projects that national real GDP growth will shrink from around 2.3% this year to 1.8% next year, with California feeling the effects through elevated fuel costs and disrupted port traffic.

A ‘K-Shaped’ Economy

Economists warn that AI could worsen what’s termed a “K-shaped” recovery, where high-skill workers benefit from the technology boom while low- and mid-skill workers face displacement. Job growth in healthcare and social services has been positive, but entertainment, tech, and manufacturing continue to shed positions. As Andy Challenger of Challenger, Gray & Christmas noted, “AI isn’t yet the jobpocalypse some predicted,” but the data shows the transition is far from painless for Los Angeles workers navigating the gap between old-economy jobs and new-economy opportunities.