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| Press Release |
UCLA Anderson Forecast Reports Plenty of Troubles but No Recession on the Horizon
In California, Sluggish Economy will Continue
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LOS ANGELES, December 6, 2007 - In its fourth quarterly report of 2007, the UCLA
Anderson Forecast holds steadfast to the basic tenet of a forecast they have been
making throughout the year, that the national economy is not technically in a
recession, nor is there a national recession on the economic horizon. Though the
economy is experiencing difficulty rooted in the problematic real estate sector,
as well as the result of such things as higher oil prices and a troublesome rate
of consumer debt, the UCLA Anderson Forecast does not see the possibility of enough
job loss to trigger an actual recession. The UCLA Anderson Forecast Economists
will present their quarterly economic update to Forecast members in a conference
to be held this afternoon.
In California, the central theme of the forecast remains the same as it has been
in the past few quarters and mirrors that of the national forecast: weakness in the
vast real estate sector will be the central component of a sluggish economy, but
there will not be enough job loss to trigger a state-wide recession.
The National Forecast
In his national report, UCLA Anderson Forecast Director Edward Leamer makes a simple
but compelling case for the Forecast continuing recession stance. While acknowledging
the considerable turmoil in the real estate sector, Leamer emphatically argues that
without significant job loss and an accompanying rise in unemployment, the economy
will not enter into a recession.
Manufacturing is the economic sector to look at when searching for potential job loss.
But, somewhat ironically, the manufacturing sector has never recovered the jobs it
lost from the last recession and, as a result, doesn’t have enough jobs to lose. Leamer
acknowledges that this is a historically unique set of circumstance, as manufacturing
has traditionally added jobs during an expansion. There will be job loss in the
construction sector, as well as real estate-related financial services, but not nearly
enough to trigger a recession. As part of his no recession forecast, Edward Leamer also
notes that if declines in housing were going to trigger a recession, they would have
done so already. Recessions have traditionally trailed a housing peak by no more than
a year; at this point, the business cycle is trailing the housing cycle by seven
quarters without a recession.
The California Forecast
In California, UCLA Anderson Forecast Economists Ryan Ratcliff and Jerry Nickelsburg
foresee a slightly slower and prolonged period of sluggishness for the state’s economy,
but no recession in California.
They expect unemployment to peak at 6.1% in late 2008, while non-farm payroll growth
remains below 1% through the end of next year. Real growth in Gross State Product and
Personal Income is expected to be in the 1-2% range over the same period. Adding to the
less-than-favorable forecast, they expect contraction in state and local government will
derail the momentum of a private sector beginning to recover in 2009.
The Writers Strike
UCLA Anderson Forecast has also issued a report on the economic impact of the current
WGA strike, which contains results that differ from widely published estimates. The
report, written by Economist Jerry Nickelsburg, concludes that, even if the strike were
to last through the end of March, the economic impact on the Los Angeles economy would
be about $380 million rather than the prevailing estimate of $1 billion. The report,
released last week, is included in the full forecast report.
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