The Economy in a World of Hurt...

Anderson Forecast: 'Nasty recession' to include 4 quarters of declining GDP
By
Hilary Rehder
12/11/2008
In its fourth quarterly report of 2008, the UCLA Anderson Forecast predicts that the current national economic recession will include four quarters of negative growth, followed by very tepid growth rates, and rising unemployment that lasts through 2010. California will share the national recession, with negative growth through the middle of next year and high unemployment until 2010 as well.The National Forecast

"The news from the economy is bad," writes Anderson Forecast senior economist David Shulman in his essay "The Balance Sheet Recession." "The recession we had previously hoped to avoid is now with us in full gale force."

The Forecast now expects that real gross domestic product (GDP) will decline 4.1 percent in the current quarter, followed by declines of 3.4 percent and 0.8 percent in the first two quarters of 2009.

In addition, the unemployment rate is expected to rise from its October 2008 level of 6.5 percent to 8.5 percent by late 2009/early 2010. Associated with the rising unemployment will be the loss of 2 million jobs over the next 12 months.The Forecast lays the blame for what it is calling a "nasty recession" on the financial crisis of 2007–08, noting that the economic circumstances underlying current conditions differ significantly from past recessions.

The Forecast's research also notes that the "global economy is in its first synchronized recession since the early 1990s," as Europe and Japan are also in recession, while China and India are suffering growth slowdowns — which, in turn, negatively impact U.S. exports.The California Forecast

California will join the nation in its recession, though the impact will be felt differently across the state. Anderson Forecast 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 a decline in imports coming through California ports, while the global recession weakens demand for manufactured California exports.The forecast for California sees 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.

Employment is expected to contract by 0.7 percent in 2008 and 1.4 percent in 2009 before growing at a more-than-modest 0.3 percent in 2010. The unemployment rate is expected to rise as high as 8.7 percent next year and remain at that level through 2010.

The UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state's rebound since 1993. More recently, the Anderson Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001.

The UCLA Anderson School of Management, established in 1935, is regarded among the leading business schools in the world. UCLA Anderson faculty are advancing management thinking through innovative research and teaching. Each year, UCLA Anderson provides management education to more than 1,700 students enrolled in M.B.A., executive M.B.A., fully-employed M.B.A. and doctoral programs, and to more than 2,000 professional managers through executive education programs. Combining highly selective admissions, varied and innovative learning programs, and a worldwide network of 36,000 alumni, UCLA Anderson prepares students to become future global leaders.