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| Press Release |
“Nasty Recession” For U.S. To Include Four Quarters of Declining GDP
California Unemployment to Climb to Near 9%, and a Long Slow Recovery Ahead
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Los Angeles, December 11, 2008 - In its fourth quarterly report of 2008, the UCLA Anderson
Forecast predicts that the current recession inflicting the national economy will feature four
quarters of negative growth (followed by very tepid growth rates) and rising unemployment rates
that last through 2010. The California forecast will share the national recession, with negative
growth through the middle of next year and high unemployment until 2010 as well.
The National Forecast
“The news from the economy is bad,” writes UCLA Anderson Forecast Senior Economist David Shulman
in an essay entitled, “The Balance Sheet Recession.” “The recession we had previously hoped to
avoid is now with us in full gale force.” The UCLA Anderson Forecast now expects that real Growth
Domestic Product (GDP) will decline 4.1% in the current quarter, followed by respective declines of
3.4% and 0.8% in the first two quarters of 2009. In addition, the unemployment rate is forecast to
rise from October 2008’s 6.5% to 8.5% by late 2009/early 2010. Associated with the rising unemployment
rate will be the loss of two million jobs over the next 12 months.
The forecast laid the blame for what it’s calling a “nasty recession” on the financial crisis of
2007-2008, noting that the economic circumstances underlying current conditions differed significantly
from past recessions. The research center also notes that the “global economy is in its first
synchronized recession since the early 1990s,” as Europe and Japan are also in recession while China
and India are suffering growth slowdowns (which, in turn, negatively impact U.S. exports).
The California Forecast
California will join the nation in its recession, though its impact will be felt differently across
the state. UCLA Anderson Senior Economist Jerry Nickelsburg writes that the “Inland Empire, Orange
County, the East Bay and Central Valley will be hit hardest as the recession provides a double whammy
with a generalized downturn in demand and a postponement of a recovery in residential construction.”
Coastal regions will be impacted by declining imports coming through California ports, while the global
recession weakens demand for manufactured California exports.
The outlook for California calls for a very weak first three quarters of 2009, with the glimmer of a
recovery in the fourth quarter. A key to look for will be a recovery in the rest of the country and in
Asia, which will create demand for California goods and services. Unemployment is expected to contract
by -0.7% in 2008 and -1.4% in 2009, before growing at a more-than-modest 0.3% in 2010. The unemployment
rate is forecast to rise as high as 8.7% next year and remain at that level through 2010.
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