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| Press Release |
UCLA Anderson Forecast: National Recovery Linked to Global Solutions
California Unemployment to Soar to Nearly 12% Before the Recovery Begins
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LOS ANGELES, March 25, 2009 - In its first quarterly report of 2009, the UCLA Anderson
Forecast links the current national recession to slumping, international economic conditions
that will impact the timing and pace of any national recovery. The Forecast asserts that a
turnaround in the U.S. economy depends upon a recovery in world trade. The report also states
that regardless of the steps taken by the U.S. government, national solutions will not be enough
to restore growth and therefore global solutions are essential. In California, it’s forecasted
that the economy will remain in turmoil for the foreseeable future as the twin sector engines of
consumers and construction continue to drag.
The National Forecast
In a report titled, “The Global Slump,” UCLA Anderson Forecast Senior Economist David Shulman
says, “Action from Washington will be necessary (for an economic recovery), but not sufficient.”
But he also asserts that, “at least two of the elements necessary for a recovery in economic output
will be a revival in world trade and the recognition that national solutions alone will not be
sufficient to restore economic growth. Global solutions are essential.” Shulman notes that the
stimulus packages announced or put in place in Europe, Japan and China are helpful, as are the
“quantitative easings” by the world’s central banks and that the impending London G-20 meeting
in early April could prove critical for the nation’s economic outlook.
According to the forecast report, the state of the current economy is bleak. Real GDP declined
at a revised 6.1% in the fourth quarter of 2008 and UCLA Anderson Forecast foresees further
declines of 6.8%, 4.5% and 1.7% in the first three quarters of 2009. As a result of the prolonged
contraction, the nation’s economy will likely lose 7.5 million jobs peak to trough and unemployment
will soar. UCLA Anderson Forecast predicts that the unemployment rate will peak at 10+% in mid-2010
and the employment recovery of the 2007-2009 recession will be “long and arduous.” The report also
predicts that the end of 2011 total non-farm employment will be four million below the 2007 peak and
that the unemployment rate will remain above 9% at that time.
The California Forecast
According to UCLA Anderson Forecast Senior Economist Jerry Nickelsburg, the current forecast (for
California) “reflects a deeper and longer recession than we previously thought.” The UCLA Anderson
Forecast for California is for a very weak first three quarters of 2009 and virtually no growth in
the fourth quarter of this year. The economy will begin to pick up by 2010 and by the end of next
year the state’s economy will begin to grow at something resembling normal levels.
Nickelsburg writes, “The keys to California’s recovery are (a) recovery in U.S. consumption improving
the demands for imports from Asia and the demand from California’s factories, the resumption of non-residential
public works and multi-family residential construction growth and the return of growth to the retail
sector.” As for the State’s unemployment situation, it is expected to only get worse. UCLA Anderson
Forecast expects the unemployment rate for California to rise to 11.9% in the second quarter of 2010
and average 11.7% for the year. “Though the California economy will be growing in 2011, it will not be
generating enough jobs to drive the unemployment rate below double digits until the following year.”
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