LOS ANGELES (CBSLA.com) — California’s unemployment rate will continue to drop over the next two years, and the state will continue to outpace the nation in job growth, according to a UCLA economic forecast released Wednesday.

UCLA Anderson Forecast senior economist Jerry Nickelsburg said growth in non-farm employment in California has outpaced the nation by one percentage point over the past three months and by 0.9 percentage point over the past year.

“This has resulted in the unemployment rate falling to 5.8 percent,” Nickelsburg wrote in his report. “These gains are now widespread and have taken the state to new employment heights, 5.2 percent above the previous peak. Though we expect growth rates to slow as the state moves closer to full employment in 2016, the fundamentals that have been driving the Golden State’s employment remain in place and no particular weakness or imbalance has appeared.”

Economists equate “full employment” to an unemployment rate of about 5 percent. Nickelburg projected that the state’s unemployment rate would hit 4.9 percent by the end of 2017.

His forecast calls for total employment growth of 2.6 percent this year, then 2.1 percent next year and 1.4 percent in 2017. Payrolls will grow at about the same rate, he predicted.

He also noted that residential construction is again spiking, driven by increasing rents and low vacancy rates.

“The number of new housing units permitted increased over the last three months to levels last seen at the end of the 1990s,” according to Nickelsburg. “The mix remains dominated by multi-family housing, continuing a trend evident since the end of the Great Recession.”

Nationally, senior economist David Shulman wrote in his report that the continued surge in job creation and increasing wages next year will lead “to the first year of greater than 3 percent growth in real GDP since 2005.”

“Higher wages along with a modest rebound in oil prices and higher housing costs will push the inflation rate above 2 percent, leading the Federal Reserve to embark on a gradual tightening cycle that will begin this month,” he wrote.

“Strength will be evidenced in housing and commercial construction along with a booming automobile market. The collapse in oil-related capital spending will come to an end next year and defense spending will be increasing after five years of decline.”

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