(Source: UCLA Anderson Forecast)
The UCLA Anderson Forecast releases its latest report this morning. The outlook is not rosy.
On the national front, Senior Economist David Shulman says things are "far worse" than they were just three months ago in June; his forecast calls for average Gross Domestic Product growth of just 0.9% on average for the next five quarters (ending in the first quarter of 2012). But, both he and UCLA Anderson Forecast Director Ed Leamer are steadfast in their belief that the U.S. ecomomy is not in a recession, nor is a recession in the forecast, which runs through 2013.
“Simply put, the three sectors that would normally put the economy into recession are already depressed; housing, consumer durables and inventories,” Shulman writes. “Even if housing starts drop to new lows, this sector of the economy has shriveled so much that it would only have a modest impact on economic activity … it is one thing for housing starts to decline from an annual pace of two million units to one million and quite another for starts to decline from 600,000 units to 300,000 units. If we are to have a new recession it would have to come from a collapse in exports, a generalized decline in consumer spending with a resultant decline in business investment. All plausible, but we are not forecasting that eventuality.”
In California, Senior Economist Jerry Nickelsburg writes of a "bifurcated" California, one in which the relatively recovering areas of Coastal California are offset by seriously slumping Inland California. Nickelsburg writes, “Now that the U.S. economy has stalled, the differential between Coastal California and Inland California has begun to widen and the specter of long-term economic stagnation in Inland California has reared a not very pretty head.”
We had the opportunity to ask Nickelsburg to elaborate on his forecast for California, to expand on where he believes things are headed. He told the UCLA Anderson Blog:
"The forecast implicitly raises the question of what Inland California will look like in five years. Currently, Inland California has some of the highest unemployment rates in the country and if the recovery does not happen rapidly, what might happen to the region?
"There are lots of possibilities. Unemployed workers in construction, manufacturing, government and transportation could develop new industries. Or, Inland California could languish until population pressures and housing price pressures from coastal communities induce people once again into longer commutes (from inland communities) and revitalize construction again. Or, we could even see outmigration, as in other areas, when industries go into long periods of decline.
"The forecast doesn't answer these questions necessarily, but it does raise the implicit question: What Will this area look like in five years and what should public policy be?"
One area of public policy that interests Nickelsburg is education. He says that in an information economy education becomes key and that workers must be prepared to educate themselves and reinvent themselves over the course of their careers.