Tweet
UCLA Economists: Recession Is Close But Not Imminent
LOS ANGELES -- The nation is "certainly close" to a recession, with real growth likely to remain below 2 percent in 2007, but the economy should return to a 3 percent rate of growth by the middle of next year, UCLA economists said Tuesday.
In California, they said, weakness in the housing sector will finally have an impact on the job market, with the combination of job losses in construction and real estate finance dragging job growth in the state to less than 1 percent for the next five quarters.
Unemployment will rise slightly to 5.5 percent in California, and Gross State Product and personal income will grow at a less-than-average rate of just below 3 percent, according to the quarterly UCLA Anderson Forecast released today by the UCLA Anderson School of Management.
According to the forecast's authors, the national economy is now "certainly close" to recessionary conditions, with real growth in 2007 projected at 1.8 percent, "roughly on par with the near-recessionary environment of 2002," when real GDP advanced at 1.6 percent.
But "a recession is not imminent for the U.S. economy," according to economist David Shulman, who authored the national section of the forecast.
The "housing-induced" sluggishness in the economy will last into early next year, the forecast said, but growth will return to around 3 percent by mid-2008, thanks to improvements in real estate and net exports.
The Federal Reserve won't be providing much pump-priming, with no interest-rate cut expected until the fourth quarter of 2007 as the Fed pursues an anti-inflation policy dating back to the mid-90s, according to Shulman.
In the meantime, weakness in the housing sector will finally spill into consumption spending, as reflected by the fact that auto sales have been weak and retail sales stalled in April, according to the Anderson Forecast.
The nation's economy grew by an anemic 0.6 percent in the first quarter, a sharp decline form the preceding quarter and the smallest increase in four years, the forecast said.
So why are we seeing a bull market on Wall Street?
"... It is the strength of the global economy that is powering the stock market to new highs," Shulman wrote. "It is no accident that the Wall Street rally is being led by the giant global corporations who are benefiting most from the worldwide expansion."
Comment