Wall Street may be seeing glimmers of a recovery, but UCLA economists are coming out with a new forecast today that offers a grim picture of the year ahead.
Nationwide, the unemployment rate will worsen -- peaking late next year at 10.5%. And in California, which has been battered by tumbling housing, retail and manufacturing sectors, the jobless rate will soar to 11.9% by mid-2010, the latest UCLA Anderson Forecast says.
"The national economic outlook remains bleak," wrote David Shulman, a senior economist for UCLA.
FOR THE RECORD
Economic report: An article about a UCLA economic forecast in Business on Wednesday included a photograph of a half-built condominium complex in Murietta. The caption indicated the project had been halted because of the recession. The development has been stalled for several years because of litigation, according to Murietta Mayor Gary Thomasian.
"As a result of the prolonged contraction, the economy will likely lose 7.5 million jobs peak to trough and unemployment will soar."
In releasing their report, however, UCLA economists noted the challenge they faced in trying to forecast the future in the current volatile environment.
With dramatic changes in federal policy occurring almost on a weekly basis and few historical parallels with which to compare the current recession, forecasts are being delivered in the most uncertain of times for economists.
"The variables we're observing are very unusual," said Edward Leamer, director of the quarterly UCLA Anderson Forecast. "There's nothing like it in the historical records. The bottom line is we're not having a forecast, we're having hunches."
Early last year, UCLA said the nation would suffer from tough economic conditions but would ultimately avert a recession. Leamer said that at the time, he did not believe consumer spending could tank the way it did in the latter part of 2008.
This time, the closely watched UCLA report does not hold back.
The researchers cite the unprecedented losses to U.S. balance sheets -- $9 trillion in stocks and $5.5 trillion in home values.
The financial crisis, they say, has swelled into such a global problem that national policy may be ineffectual. The United States needs its international trading partners to reverse their slowdowns and reignite the exchange of imports and exports.
Nationally, the UCLA forecasters say the economy will begin to grow slowly by the fourth quarter of this year. That's when residential construction should also begin to turn around, but exports will continue to slide downward until the beginning of 2010.
Consumer prices should snap out of a downward trend the second half of this year, but disposable income rates will not match the high levels of 2004 until 2011.
