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UCLA holds line on forecast: No recession
UCLA holds line on forecast: No recession - sacbee.com
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UCLA holds line on forecast: No recession
By Dale Kasler -
dkasler@sacbee.com

Published 12:00 am PDT Tuesday, March 11, 2008
The forecasters at UCLA are sticking to their "no recession" predictions.
Despite worries on Wall Street and troubling unemployment numbers, the
quarterly UCLA Anderson Forecast, to be released today, says the U.S. and
California economies will continue to weaken but not to the point of recession.
UCLA's reasoning, in a nutshell: The housing market and mortgage lending
industry, as weak as they are, are simply too small in relation to the overall
economy to cause a recession.
But the forecasters acknowledge that circumstances could change, especially if
tumultuous financial markets dry up credit or the decline in "the wealth effect,"
caused by falling home values, contributes to a dive in consumer spending.
"There are rumblings in the retail trade sector that are of concern to me,"
economist Ryan Ratcliff, one of the authors of the forecast, said in an interview
Monday.
His colleague Edward Leamer, the forecast's director, wrote that his "no-recession
forecast remains nervously intact."
Though the economy is obviously slowing, he said a recession traditionally occurs
within a year of the start of a slowdown in housing. This time, though, housing has
been slumping for two years and there's still no recession a sign the nation could
squeak by, he said.
Other public and private economists disagree. The fact that the U.S. recession
hasn't begun yet means nothing, said former Anderson forecaster Chris Thornberg,
now a private consultant. It takes time for the housing market to cause a
http://www.sacbee.com/103/v-print/story/775348.html (1 of 2)3/16/2008 7:39:07 PM UCLA holds line on forecast: No recession - sacbee.com
recession, he told an audience in Sacramento last week.
"A housing bubble is like a slow-moving train wreck," Thornberg said at a meeting
of the Appraisal Institute's Sacramento Sierra Chapter. Thornberg, the head of
Beacon Economics in Los Angeles, said California is already in a recession; the
nation is heading into one.
Among the signs of a possible recession: a drop in national payroll jobs of 63,000
last month and continuing declines in the stock market. Sacramento-area
unemployment, at 6.4 percent, is the highest it's been in 11 years. Statewide
unemployment is 5.9 percent, or nearly one percentage point higher than a year
ago.
In a report released Monday, Chapman University in Orange County said its
quarterly index of California consumer confidence fell to its lowest level since the
index was launched in 2002.
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