Overview 

As we head into Q3, the economy is on steady footing, though some pressures remain beneath the surface. Growth is holding up, the labor market remains supportive, and financial markets continue to show resilience. Locally, SoCal compares favorably with national trends on key measures like unemployment and inflation. That is encouraging for our region, though it is important to remember that prices here have already risen significantly in recent years.

Interest Rates & the Federal Reserve

The Fed held its benchmark rate steady between 3.50% and 3.75% at its June meeting, and officials signaled they want to see more progress on inflation before moving rates lower. Updated projections showed policymakers now expect inflation to stay higher for longer, with the median year-end federal funds rate projection rising to 3.8%. Some policymakers now see the possibility of rate increases later this year, reinforcing the higher-for-longer message.

For members, that means borrowing costs may remain elevated for now. A slower path to rate cuts could continue to affect mortgages, auto loans, credit cards, and savings rates. The Fed remains focused on inflation, and future decisions will depend heavily on the data in the months ahead.

Growth, Jobs & Markets

Economic growth remains positive, and the labor market continues to provide support. National unemployment was 4.3% in May, while San Diego’s unemployment rate declined to 3.9%, down from 4.1% in April. That local advantage suggests SoCal’s job market remains resilient, even as hiring has become more measured across parts of the economy.

Financial markets have also shown resilience. Major stock indexes remain near record highs despite some volatility tied to inflation concerns, energy prices, and global uncertainty. Market resilience continues to be one of the defining themes of 2026.

Inflation

Inflation remains a key focus for households, markets, and the Fed. National headline CPI rose 4.2% year over year in May, while San Diego’s headline CPI increased 3.8%. On the surface, SoCal’s lower inflation rate is encouraging and compares favorably with the national figure.

Still, the local inflation picture needs some context. Prices in SoCal may not be rising as quickly partly because they already rose so much after the pandemic. After several years of higher inflation in an already expensive region, consumers and businesses may have less room to absorb additional price increases.

Energy remains an important part of the inflation story. In SoCal, energy prices were up sharply from a year ago, while core inflation, which excludes food and energy, was more moderate. That helps explain why many households may still feel pressure even when some inflation measures are improving.

Consumers & Housing

Consumers remain cautious about the broader economic outlook, though spending has held up better than many expected. Consumer sentiment improved in June from May’s record low but remains weak overall. At the same time, the personal savings rate fell to 2.6% in April from 4.3% in January, suggesting that many households have less cushion. For many members, the practical impact is still clear: budgets remain tight and planning ahead matters.

Housing remains one of the clearest examples of affordability pressure. Higher borrowing costs continue to limit purchasing power, and home price momentum has slowed across many markets. National home prices were up just 0.7% year over year in March, while San Diego home prices were up about 0.8%. That modest gain shows the local market is holding up, though affordability remains challenging.

Bottom Line

SoCal is entering Q3 from a relatively strong position. Local unemployment is lower than the national rate, and local inflation is running below the national figure. Those are favorable signs. At the same time, slower local inflation may also reflect how expensive the region has already become, not a full return to affordability.

For members, the message is to stay prepared. Rates may remain higher for longer, prices are still elevated, and housing affordability remains difficult. At the same time, the local economy continues to show resilience.

If you have questions about your finances, financial goals, or next steps our team is always here as a trusted resource for our members. Explore our financial wellness resources or connect with our team to learn more.