Thursday, December 11, 2008

UCLA Anderson The Magnificent Says It's Going to be a Nasty Recession

Given that the economy over the next twelve months will be largely determined by activities of Ben Bernanke and the Federal Reserve over the next twelve months, and that it doesn't appear that even Bernanke knows to what degree he will boost the money supply over that period, UCLA Anderson has to be labeled UCLA Anderson the Magnificent, and nothing less than courageous, for making a forecast out to 2010. But they have done just that.

UCLA Anderson Forecast predicts that the current recession will be "nasty" inflicting the national economy with four quarters of negative growth (followed by very tepid growth rates) and rising unemployment rates that last through 2010, according to a press release they issued today.

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.

For California they forecast negative growth through the middle of next year and unemployment as high as 8.7% until 2010.

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.

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