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UCLA Anderson Forecast Predicts “Weakness” In The National Economy Due To Problems In The Housing Market

California Economy To Experience Similar Conditions as State’s Real Estate Market Cools; No Recession Forecasted for the U.S. or California
December 7, 2005
UCLA Anderson Forecast

LOS ANGELES — In it’s 54th annual report, the UCLA Anderson Forecast sees problematic conditions in the National economy through 2007, but not enough to be called a recession. Manifest problems in the housing sector will result in sluggish economic conditions, but with few jobs to lose in an already moribund manufacturing sector, no true recession is foreseen. The California Forecast mirrors that of the Nation. The housing market will cool off, consumer spending will slow and there may be some job loss in construction and other real estate related industries. California “probably will not see a full-blown recession.”

The National Forecast
In the latest Forecast report, UCLA Anderson Forecast Director Edward Leamer writes, “Housing is in a perilous position,” but that, “housing alone cannot constitute a recession.”

The report titled, “No Recession Any Time Soon, But Troubles Ahead, Nonetheless,” details the relationship between the housing sector and the employment sector. Dr. Leamer asserts, “A recession is first and foremost a period of job loss and elevated unemployment.” While a hit to the housing market may cause a loss of some jobs in construction and related industries, the manufacturing sector is virtually at the floor and there is hardly any room to fall further. In short, with no excess employment in manufacturing, there are no jobs to lose. Thus, a slowdown in housing will produce a slowed economy, but without the job losses in the manufacturing sector, it won’t be a recessed economy.

The California Forecast
The California Forecast, authored by Senior Economist Ryan Ratcliff, also warns of problems in the housing market, with some job loss in related sectors. The Forecast calls for a plateau in home prices, a moderate decrease in sales and new building and two years of weak growth.

The report also calls for a slowdown in construction activity through 2007. Ratciff states that, “Overall, this leads to two years of anemic growth in all of the major indicators – but no recession.”


About UCLA Anderson Forecast
The UCLA Anderson Forecast, one of the most widely watched and often-cited economic outlooks for California and the nation, is no stranger to accurate forecasts. The forecasting team is credited as the first major U.S. economic forecasting group to declare the recession of 2001. The team was also unique in predicting both the seriousness of the early-1990s downturn in California, and the strength of the state’s rebound since 1993.

Founded in 1952, the UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation. Award-winning for its accuracy, the UCLA Anderson Forecast often breaks with consensus in its quarterly forecast reports, which feature projections for major economic indicators, including inflation, interest rates, job growth and gross domestic product growth.

About UCLA Anderson School of Management
UCLA Anderson School of Management is perennially ranked among the top-tier business schools in the world. Award-winning faculty renowned for their research and teaching, highly selective admissions, successful alumni and world-class facilities combine to provide an extraordinary learning environment. UCLA Anderson students are part of a culture that values individual vision, intellectual discipline and a sense of teamwork and collegiality.

Established in 1935, UCLA Anderson School of Management provides management education to more than 1,400 students enrolled in MBA and doctoral programs, and some 2,000 executives and managers enrolled annually in executive education programs. Recognizing that the school offers unparalleled expertise in management education, the world's business community turns to UCLA Anderson School of Management as a center of influence for the ideas, innovations, strategies and talent that will shape the future.
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