Posted on 07/25/2005 4:39:09 PM PDT by ex-Texan
LOS ANGELES — In its second quarterly report of the year, the UCLA Anderson Forecast suggests that the U.S. economy will experience slower than normal growth through 2006 because of weakness in housing, but not a dramatic slowdown.
The National Forecast
UCLA Anderson Forecast Director Edward Leamer says that the economy will continue to experience sluggish growth through 2006, but that “the likelihood of a recession within a year is minimal.”
According to Leamer and to the quarterly report authored by UCLA Anderson Forecast Senior Economist Michael Bazdarich, the conditions for a recession are in place. For several years now, the UCLA Anderson Forecast has been emphatic about the point that consumers’ spending rates were keeping the economy buoyant and fueling the expansion. Consumers’ ability to do this – unique among post-war economic expansions – was due in part to a housing market that saw rapid increase in real estate values. Consumers were able to spend, in part, due to the wealth they were accumulating in their homes.
Bazdarich, though, details the cooling off of the housing market and both he and Leamer now believe that the days of consumer spending as a driver are in the past. Still, there is no recession in the forecast. “Our feeling is that there are certain precipitating events that must occur before a recession can be forecasted,” Leamer said. “And these events have not occurred yet. The conditions are in place for a recession (such as the cooling of the housing market and the related wealth effect), but we are not seeing evidence that it will happen within our current forecast period.”
The California Forecast
In his California forecast, UCLA Anderson Senior Economist Christopher Thornberg highlights the positives in the California economy, but dampens his enthusiasm with some words of real caution.
“The California economy … has been showing very solid signs of growth. Taxable sales are up a full 10 percent (year over year), office vacancies are falling and non-residential investment is on the rise; the airport is humming with travelers and the ports are crowded,” said Thornberg.
But beneath the surface, Thornberg sees troubling signs “of an economy not at the start of a new expansion, but very near the end of an old one.” Citing the slow growth of personal income and an imbalance in the relationship between taxable sales and wages, Thornberg believes that California’s current economic growth is in a fragile condition. Employment growth in the state is currently being driven by consumer demand, in turn being driven by the wealth effect of a hot real estate market.
“Even if the real estate market doesn’t pop, the fact that it has to start cooling is enough to slow the process down,” said Thornberg. “Prices don’t have to go negative to have an impact, just 15 percent to zero percent is enough to start the dominoes falling.”
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.
Watch what happens in San Francisco and Boston very carefully. The fact that some of the largest holders of commercial real estate are dumping properties in California is not a positive sign.
Calpers, the nation's largest pension fund; Equity Office Properties, the giant real estate investment trust; and private landlords such as the Shorenstein family of San Francisco are among big sellers that have been shedding billions of dollars worth of office and retail property in recent months. Source
Read More About Real Estate Bubbles? But what do I know, anyway? Being just a old geezer and all that yada, yada, yada ?
well the Anderson school predicted in 2003, that GDP growth through the end of 2004 would be 2% at best. It was more like 4.5%
They successfully predicted the 2001 recession but have been getting by on their laurels ever since.
where does it say that commercial reestate is being dumped.
It isnt commerical reestate that is overheated it is residential
The 2006 elections are coming up. Expect Greenspan, big funds, and others to try to create conditions that will have some effect in Congressional and Senate elections.
what a prophetic statement
only a few months before the los angeles economy went into the toilet in 1991, they predicted a robust economy!
I respectfully disagree.
We are no longer in an industrial economy, or even in a technology economy...we are now in an innovation economy...and we are in a desperate war with Islam (declared not by us but by Islam). War changes the complexion of an economy...it supercedes the normal rules of growth. We do what we must do.
This world will expand at a breakneck pace for the foreseeable future.
If you don't believe me...ask India.
IMO
i am worried about a recession in 2007-08...everything seems to go the Clintons way
I know the residential RE market...in fact I know the Atlanta RE market particularly. What is hot in Atlanta are those areas nearer to downtown (inside the perimeter). That area should have kicked way up years ago.
What will change the RE market in every city is the transistion to telecommuting. That will distribute the American population to the rural areas.
In the area in which I live, we have had numerous top school lawyers and doctors (of only certain specialties of course) relocate because of the rural quality of life and for family reasons...all made possible by the acceptance of and dependability of the internet
I used to work on Wall Street and now I live in my home town and do work that is not too removed from what I did in NYC.
We are at war (thought the Democrats would never admit it) and war sets our teeth on edge. We get up earlier and stay sharper and get more done for the right reasons. We are no longer competing for greater wealth...we are now competing for our lives.
"The 2006 elections are coming up. Expect Greenspan, big funds, and others to try to create conditions that will have some effect in Congressional and Senate elections."
Gosh, I'm going to go out on a limb, too, and bet they DO have some effect. ROFLMAO.
Does anyone have a chart comparing the Anderson Forecast to reality over time? I hate economic prognosticators, because they always tout their success and you never hear about their failure. I'm reminded of that old Bloom County cartoon.
atlanta67 -- you have to clink the link next to the quoted section.
ken21 -- even UCLA must soften their warnings in this PC era.
Atlanta doesnt have a hot real estate market overall..maybe some neighbourhoods, but overall reestate appreciation in atlanta is like 4% annually.
yuore probably right about how telecommuting will change living patterns
how does that stop Hillary in 2008?
I honestly believe that the Clontons, both of them, sometime in the 1970s, sold their souls to satan for political success.
Everything goes their way. Unfortunatlry for those around them the deal with Satan doesnt cover FOBs, associates, co-workers, all of who fail politically, end up dead or in jail. Clintons always succeed but they leave a wake of destruction for those that attach themselves to the Clintons
Sarbanes-Oxley is putting a a major damper on telecommuting. Executives who are now potentially criminally liable for the acts of their employees aren't comfortable with letting them work out of sight. Work is heading back to the cities - 8 to 5, under the watchful eye of management. And urban housing prices will contiune to go up as a result.
Give me a friggin break. This IDIOT characterize 3.8% growth in the first part of the year 'sluggish growth'. There is nothing respectable people who are so obviously biased in their views. This is one more of your bullcrap doom and gloom posts. Why don't you just post and DU and vote for Hillary.
Weak Housing market? They must be smoking loco weed.
I tried to Google that issue but it left me in a fog. Give me your take on why it is so bad for telecommuting.
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