In its second quarterly report of 2008, the UCLA Anderson Forecast cautiously affirms the "no recession" prognostication it has been advocating over the past several quarters but says the housing bust will continue to wreak havoc on the national economy.
At the same time the report also acknowledges that the most recent employment data -- an increase in the unemployment rate from 5 to 5.5 percent -- falls within "recession range."
Recession or not, the Forecast says Gross Domestic Product could dip into the negative range over the next six to nine months.
The Forecast says that real GDP growth from the third quarter of 2007 through the end of 2009 will average "a very tepid" 1.2 percent, adding that "we expect that the current quarter real GDP growth will come in at a minus 0.7 percent and the first quarter of 2009 could be negative as well."
Additionally, unemployment will reach 6 percent by the end of 2009, with a caveat that if the May 5.5 percent unemployment rate is duplicated in June, a 6 percent unemployment rate would come much sooner.
In California, the question is whether or not hard times in the real estate and ancillary sectors have had significant impact on other areas of the state's economy.
The California report states, "There is no generalized spread of contraction to the rest of the economy, then when the [housing, construction and finance] sectors do hit bottom, California will be posed to take off once again."
UCLA Anderson Forecast Economist Jerry Nickelsburg concludes that California's service sectors, the state's traditional economic engines of growth, are still sidestepping the turbulence in the financial, construction and real estate sectors, keeping California's employment growth positive.
He also notes that exports and agriculture, which had not shown much growth recently, are now providing enough additional positive data to also offset the sharp declines in home construction and real estate.
The Forecast predicts a very weak California economy throughout 2008. The strength in exports of both goods and services in the Bay Area and Los Angeles, along with the strength of agriculture in the Central and Salinas valleys, will keep California employment flat the first half of the year, with the unemployment rate topping out at about 6.1 percent by year end.
Residential construction will remain at a very low level throughout next year, while the now permanent job losses in the finance sector must be offset by growth in other areas.
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