December 06, 2007
UCLA Anderson Forecast Reports Plenty of Troubles but No Recession on the Horizon
In California, sluggish economy will continue
LOS ANGELES -- 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 circumstances, 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 percent in late 2008, while non-farm payroll growth remains below 1 percent through the end of next year. Real growth in Gross State Product and Personal Income is expected to be in the 1-2 percent 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. Click here to view the report on the impact of the writer's strike (PDF).
About UCLA Anderson Forecast
UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state’s rebound since 1993. More recently, the Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001. Visit UCLA Anderson Forecast on the Web at http://uclaforecast.com.
About UCLA Anderson School of Management
UCLA Anderson School of Management, established in 1935, is regarded among the very best business schools in the world. UCLA Anderson faculty are ranked #1 in "intellectual capital" by BusinessWeek and are renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides management education to more than 1,600 students enrolled in MBA, Executive MBA, Fully-Employed MBA and doctoral programs, and to more than 2,000 professional managers through executive education programs. Combining highly selective admissions, varied and innovative learning programs, and a world-wide network of 35,000 alumni, UCLA Anderson develops and prepares global leaders.
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