March 25, 2009
UCLA Anderson Forecast: National Recovery Linked to Global Solutions
California unemployment to soar to nearly 12% before the recovery begins
LOS ANGELES -- 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."
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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