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| Press Release |
UCLA Anderson Forecast Predicts “Meaningful Downturn” in the National
Economy Due to Higher Interest Rates, Weakness in the Housing Sector;
California Economy to Experience Job Losses as State’s Real Estate Sector Cools
No Recession Forecasted for the U.S. or California
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LOS ANGELES, April 27, 2006 — In its first quarterly report of 2006, the UCLA Anderson Forecast states,
“a meaningful slowdown for the U.S. economy is in the offing for late 2006 and early 2007,”
despite strong near-term economic growth. Likening conditions to such mid-cycle slowdowns as
1985-86 and 1994-95, the Forecast sees sub par growth, but does not predict a recession. In
California, a softening of the still hot housing market will contribute to an overall slowdown
in the State’s economy, while improving sectors of the economy unrelated to the housing and
construction buoy the overall forecast.
The National Forecast
UCLA Anderson Forecast Senior Economist David Shulman calls for real GDP growth of 3.2%, 2.4%,
and 3.2% in 2006, 2007 and 2008, respectively. The primary risk, he writes, “Is that the
slowdown we envision turns into something worse.”
The report, titled “Too Complacent” makes the case for an economic slowdown in the U.S. economy. Shulman opines that higher short- and long-term interest rates, an approximately flat yield curve that bounces between being positively sloped and inverted, significant weakness in the housing sector and the continued pressure of higher energy prices on consumer spending all contribute to overall weakness in the economy. Part of the weakness will be offset by strong capital spending and a leveling off in the decline of net exports.
The California Forecast
The California Forecast, authored by Senior Economist Christopher Thornberg, continues to warn
of a slowdown in the housing market and says, “The only debate now is how hard a landing there
will be and what will it mean for the general economy.” One impact, Thornberg forecasts, is
that 200,000 jobs will likely be lost in the construction sector as residential construction
and remodeling slow markedly. Thornberg forecasts the unemployment rate will rise from 5.6%
in 2006 Q4 to 6.3% and 6.2% in 2007 Q4 and 2008 Q4.
On the positive side, the report says that jobs in professional services are growing and even
though the manufacturing sector is not adding many jobs, output continues to rise. And while
the cooling housing market certainly has a significant downside, it is actually beneficial for
export-oriented California.
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About UCLA Anderson Forecast
The UCLA Anderson Forecast, one of the most widely watched and often-cited economic
outlooks for California and the nation, is no stranger to accurate forecasts.
The forecasting team is credited as the first major U.S. economic forecasting group
to declare the recession of 2001. The team was also unique in predicting both the
seriousness of the early-1990s downturn in California, and the strength of the state’s
rebound since 1993.
Founded in 1952, the UCLA Anderson Forecast is one of the most widely watched and
often-cited economic outlooks for California and the nation. Award-winning for its
accuracy, the UCLA Anderson Forecast often breaks with consensus in its quarterly
forecast reports, which feature projections for major economic indicators, including
inflation, interest rates, job growth and gross domestic product growth.
About UCLA Anderson School of Management
UCLA Anderson School of Management is perennially ranked among the top-tier business
schools in the world. Award-winning faculty renowned for their research and teaching,
highly selective admissions, successful alumni and world-class facilities combine to
provide an extraordinary learning environment. UCLA Anderson students are part of a
culture that values individual vision, intellectual discipline and a sense of teamwork
and collegiality.
Established in 1935, UCLA Anderson School of Management provides management education
to more than 1,400 students enrolled in MBA and doctoral programs, and some 2,000
executives and managers enrolled annually in executive education programs. Recognizing
that the school offers unparalleled expertise in management education, the world's
business community turns to UCLA Anderson School of Management as a center of influence
for the ideas, innovations, strategies and talent that will shape the future.
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