Back in March, when we last heard from the Anderson Forecast, that no-recession prediction seemed like a stretch (some economists thought the UCLA guys had gotten too much sun). So now it's the middle of June and they're still saying no recession. For that, we can thank the diversified, export-driven L.A. and Bay Area economies. In California, the forecast is for a 2008 growth rate of 1.5 percent in personal income, "not a barn burner, but not bad in a slow economy," writes UCLA economist Jerry Nickelsburg. Most of that growth will take place later in the year. Statewide unemployment is expected to top off at 6.1 percent and slowly fall back.
Of course, none of this means they think the economy is in great shape. Nationwide, the forecast calls for little or no growth in the gross domestic product this quarter. The home mortgage finance industry, much of it centered in OC, is taking an especially big hit - and those jobs are not coming back. But the disastrous housing market has not badly damaged the job market – and that’s why the nation might avoid a recession. People have not been foreclosing on their homes as a result of being out of work (as happened in the early 90s). They’re foreclosing because of ill-advised loans that were made at the height of the housing boom. Big difference. More from Nickelsburg:
The unpleasant economic facts which are making the headlines are the budget crisis in Sacramento, the continuing plunge in housing prices and skyrocketing foreclosures, a slowing of imports through California’s major ports, and continued mortgage related troubles for the financial industry. So does that mean that economic activity is declining in California? The answer to this question turns out to be no.
The traditional engines of growth for California, the services sectors, just barely keep California employment growth in positive numbers through April, and exports and agriculture, two important California activities which have not grown much in the recent past, provided enough additional growth to counteract the sharp decline in home construction and finance.
The two principal drags on the California economy will continue to affect growth into 2009. One difference in our forecast is that we do not see residential construction picking up quite as rapidly as we did three months ago. It should remain at very low levels through 2009. The good news in all of this is the rapid depreciation of house values augers for a quicker recovery in residential construction than in the 1990s and faster growth in the near term. The decline in home construction will be over with by early 2009 and personal income will hit 1.8% for the year.