December 10, 2008
UCLA Anderson Forecast: "Nasty Recession" For U.S. To Include Four Quarters of Declining GDP
California unemployment to climb near 9%
LOS ANGELES - 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.
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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