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| Press Release |
UCLA Anderson Forecast: Growing National Economy, Coupled With Tepid Job Growth Renders "Bipolar" Conditions For U.S.
Unemployment to stay above nine percent through 2011
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LOS ANGELES, CA - March 24, 2010 - In its first quarterly report of 2010, the
UCLA Anderson Forecast renders a “bipolar” diagnosis for the national economy,
referencing the dual conditions of slow-but-sure growth in the national gross
domestic product, coupled with an unemployment rate predicted to remain in double
digits until 2012. The California economy remains focused on job creation as well,
with conditions ripe for growth that has yet to appear. In addition to the U.S. and
California prognostications, the Forecast for the first time includes the new
Ceridian-UCLA Pulse of Commerce Index™ (PCI) by UCLA Anderson School of Management
in its quarterly publication, with an emphasis on the index’s regional data for
California and the Western states.
The National Forecast
In a report titled, “The Bipolar Economy,” UCLA Anderson Forecast Senior Economist
David Shulman explores the duality of a national economy, where GDP is growing while
job creation remains scarce – and is expected to remain scarce through 2012. Shulman
suggests that the Washington’s economic stimulus packages may have unintentionally
caused the economic schizophrenia. Tax cuts and spending programs, coupled with a
non-sustainable zero interest policy spur growth, but businesses do not make long-term
hiring decisions based on temporary government policies. “Nevertheless, the economy is
now on a growth path and employment will soon be increasing, albeit modestly,”
Shulman writes.
The Forecast’s case for recovery is based on strength in business equipment and
software, exports and a revival in home construction from postwar lows. With the
exception of housing, these factors are already making positive contributions to the
economy. Growth will be held back by declines in non-residential construction and
stagnation and retraction in the state and local government sectors. The Forecast
expects the economy to grow at a 3.2% rate for the first quarter of this year, and
then level off to about 2%, leaving 2010’s overall growth around 2.3%. In 2011 and
2012, GDP is forecasted to be 2.3% and 3.2% % respectively. However, payroll employment
is still forecasted to be two million jobs below the 2007 peak at the end of 2012.
In a cautionary note, Shulman opines that the real risk to the economy is inflation, as
the Federal Reserve’s monetary policy has created circumstance ripe for inflation.
Shulman believes the Fed understands this risk, will tighten monetary policy and that
inflation will remain under control.
The California Forecast
Writing about California, UCLA Anderson Senior Economist Jerry Nickelsburg notes that
despite the recession having officially ended, California’s unemployment rate continues
to rise, while local governments continue to shed jobs. The outlook for the balance of
2010 is for little or no growth in the state, with the economy picking up speed slightly
by the beginning of next year. More normal growth rates for California should be in place
by the middle of 2011. The keys to California’s recovery are a growing demand for
manufactured and agricultural goods from outside the state, the recovery of U.S.
consumption, which increased the demand for Asian imports and for products from
California’s factories, increased public works construction and increased investment
in business equipment and software.
The Forecast calls for employment in 2010 to climb but not to exceed levels of 2009.
Once employment growth returns in 2011, employment will begin to grow faster than the
labor force at a 2.3% rate and the unemployment rate will begin to fall. Real personal
income growth is forecast to be 1.3% in 2010 and 3.7% and 4.5% in 2011 and 2012
respectively. The unemployment rate – currently at 12.5% -- will fall slowly through the
balance of this year and should average 11.8% for 2010. Though the state’s economy will be
growing, it won’t be generating enough jobs to push the unemployment rate below
double-digits until 2012.
The Ceridian-UCLA Pulse of Commerce Index
Earlier this year, UCLA Anderson and Ceridian Corporation jointly announced the creation
and release of the Ceridian-UCLA Pulse of Commerce Index™ (PCI) by UCLA Anderson School of
Management. The index is based on real-time diesel fuel purchase transactions at over 7,000
service locations in the U.S., measuring shipments of products across the country. The index
is built by analyzing Ceridian’s electronic card payment data that captures the location and
volume of diesel fuel being purchased by over the road trucking operations.
The initial releases of the PCI focused on its ability to track the national economy and
correlate with GDP. In UCLA Anderson Forecast’s most recent publication, Forecast Director
Edward Leamer (also chief economist for the PCI) demonstrates the index’s ability to shed
light on regional economies. Significantly, the PCI data allows for analysis at the county
level, for individual cities and for the various interstates and highways. For highways,
fuel purchases is one measure of the importance of each route. In California, the PCI shows
that is it the southern routes – I-10 and I-40 – that carry the most product, along with I-5
in the center of the state. I-80, by contrast, is not so heavily travelled and has the most
extreme seasonal variances.
As part of his report examining California and its neighboring western states, Leamer uses
the PCI to demonstrate how seasonal conditions impact the various states in the region.
Nevada and Utah, where winter has a larger impact on travel, are shown to have the biggest
declines in trucking activity over the last three months, while California and to even greater
extent, Arizona, suffer almost no seasonal impact at all. Overall, California trucking – which
experienced relatively smaller declines than its neighboring states – is almost fully recovered
in relation to the peaks enjoyed in 2006 and 2007, while Utah, Arizona and Nevada show the
steepest declines related to their peaks – with Utah still in free fall.
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