Economic Forecasts

Not long ago, those who predicted that China's economy was headed for a fall were in a lonely place. U.S. economist Nouriel Roubini, widely praised for calling the U.S. housing meltdown, was dismissed as a serial contrarian when it came to his pessimistic China views. So was well-known hedge fund manager Jim Chanos. Lawyer and author Gordon Chang was derided as a Chicken Little for his 2006 book "The Coming Collapse of China. " Suddenly they're all Nostradamus. Backed by data showing a slowdown in the world's second-largest economy, doomsayers have taken center stage.

Economists sharply raised their forecast for first-quarter economic growth after news of an unexpectedly big drop in the nation's trade deficit in February. The Commerce Department reported Thursday the trade deficit narrowed in February to $46 billion from $52.5 billion in January. Most of the decline was due to a sharper-than-expected 2.7% falloff in imports, much of that from China. U.S. exports in February was up a tiny 0.1%. Analysts said the trade gap was likely to turn up in March as Chinese production and shipments resumed after the Lunar New Year holiday in February.

In the latest economic forecast, Chapman University economists Tuesday predicted that Los Angeles County will create about 77,000 nonfarm payroll jobs this year, growing by 2% from 1997. Chapman analysts say taxable sales in the county should increase by 4.7%, about the same as in 1997. They note, significantly, that Los Angeles County is a more affordable place today, with lower mortgage rates, higher income growth and lower housing prices.

Things are looking up for California's beleaguered economy as the recovery from the recession hits a period of slow, modest growth this year and next, according to two economic reports. Over the next two years, the state is poised to add nearly half a million jobs and drive the current 11.1% unemployment rate down to nearly 10%, the Los Angeles County Economic Development Corp. said in an annual forecast scheduled to be released Wednesday. And on Tuesday, financial rating company Standard & Poor's upgraded its outlook on California's ability to repay its debts to "positive" from "stable.

Amid increasing political pressure and turbulent financial conditions in the world economy, the Federal Reserve is letting its massive bond-buying stimulus program expire in the next few days without a new initiative to prop up the weak American recovery. The central bank is betting that, even without additional monetary or fiscal stimulus, U.S. economic growth will pick up sharply in the latter part of the year after a disappointing first half. But in adopting a kind of wait-and-see policy, the Fed faces increasing risk of antagonizing politicians from the right and the left, as well as investors.

Chapman University's annual economic forecast will be presented Thursday, including its one-year and five-year outlooks for Orange County and the nation. Chapman's is the most closely followed of a handful of economic reports in the county, and it is well-known for its accuracy in predicting growth. Last year's Chapman forecast found little to fault in the Orange County economy, and its midyear revision was even more upbeat. So now the question is: Will the expansion hold up in 1998?

It's New Year's Day, and everyone wants to know what's ahead. Shall we call Chase Econometrics or badger Henry Kaufman? Don't be silly. California is just crawling with psychics. Better yet, they have fax machines. They work at this full time, and their clients include entrepreneurs, investors and movie stars. Why should we be any different? Thus, in honor of the New Year I've impaneled the first Times Board of Psychics in order to bring readers crucial business news of the future.

The head of one of America's largest companies was very gloomy in a private luncheon conversation recently--but only about 1990 prospects for other companies, not his own, which he said was doing quite well, especially in foreign markets. Similarly, a survey of 50 leading economists by Business Week magazine found that almost all of them worried about a recession--but few predicted one.

The South Bay needs to redevelop industrial manufacturing sites for new business and be prepared for more downsizing in the aerospace industry to survive the future, according to a study to be unveiled Thursday at the 1997 South Bay Economic Forecast Conference in Torrance.

President Reagan's assertion that his budget proposals would lead to a surplus by fiscal 1991 requires rosy economic assumptions that history shows are extremely unlikely to prove true, the Joint Economic Committee of Congress said in a report released Saturday. "The record is not encouraging--it raises serious doubts about whether, under current and proposed policies, we will achieve a balanced budget by fiscal year 1991," the report, written by committee economist Paul Manchester, said.

Not long ago, those who predicted that China's economy was headed for a fall were in a lonely place. U.S. economist Nouriel Roubini, widely praised for calling the U.S. housing meltdown, was dismissed as a serial contrarian when it came to his pessimistic China views. So was well-known hedge fund manager Jim Chanos. Lawyer and author Gordon Chang was derided as a Chicken Little for his 2006 book "The Coming Collapse of China. " Suddenly they're all Nostradamus. Backed by data showing a slowdown in the world's second-largest economy, doomsayers have taken center stage.

Amid increasing political pressure and turbulent financial conditions in the world economy, the Federal Reserve is letting its massive bond-buying stimulus program expire in the next few days without a new initiative to prop up the weak American recovery. The central bank is betting that, even without additional monetary or fiscal stimulus, U.S. economic growth will pick up sharply in the latter part of the year after a disappointing first half. But in adopting a kind of wait-and-see policy, the Fed faces increasing risk of antagonizing politicians from the right and the left, as well as investors.

The economic recovery has been paying off on the bottom line for the country's banks, but the forecast for the industry remains cloudy. The sector recorded its strongest quarterly earnings since 2007 as projected loan losses shrank for the first time in more than four years, the Federal Deposit Insurance Corp. reported Tuesday. But banks in California and the West lagged behind the national recovery as they continued to work through losses on construction loans and troublesome commercial mortgages, according to a Federal Reserve report.

2010 will not be the year the hiring floodgates open. Although certain sectors of the economy are showing signs of a thaw, employers say they plan to tread carefully in the coming year, and those that are hiring say they will wait until the second half to fill jobs. But there is hope for employees who saw hours and benefits slashed, or who took on extra responsibilities as companies tried to hold on to the talent that kept them afloat in tough times. Tom Wilson, managing director at investment management firm Brinker Capital, said unemployment was expected to decline by 1 percentage point each year as the economy recovers, meaning that by the end of 2010, unemployment would hover at about 9%. Over the last 18 months, people have "hunkered down" at their jobs, said Brian Kropp, managing director of the Corporate Leadership Council, which surveys about 300,000 employees each quarter.

In case you missed it, Treasury Secretary Timothy F. Geithner this week promised America that there won't be another financial crisis in 2010. "We're not going to have a second wave of financial crisis," Geithner said in an interview with National Public Radio. "We'll do what is necessary to prevent that. We cannot afford to let the country live again with a risk that we're going to have another series of events like we had last year." Well, there it is. And you wonder why the stock market is at 14-month highs?

The airline industry will rebound modestly next year, losing only about half of what it is expects to lose in 2009, a trade group predicted Tuesday. "The worst is likely behind us," said Giovanni Bisignani, director general of the International Air Transport Assn., the trade group that issued the financial outlook. The association represents about 230 airlines worldwide. The group's forecast for $5.6 billion in net losses next year attributes the improving picture partly to growing passenger and cargo demand.

The dollar rose Tuesday against most major currencies after the government released a triple dose of strong economic data, including a report forecasting solid growth for the rest of the year. Gold prices slipped, however. Republic National Bank of New York quoted a bid for gold at $431.50 an ounce as of 4 p.m. EDT, down $3 from late Monday.

The government's chief economic forecasting gauge fell in June for the first time in six months, the Commerce Department said Tuesday, signaling that the economy is likely to stay wobbly beyond the November election. The index of leading indicators, designed to predict economic activity six to nine months in advance, dropped 0.2% in June. It was the first fall in the index since it declined 0.1% in December and the worst since January, 1991. The drop followed gains of 0.6% in May and 0.

From appliance stores in Brazil to auto assembly lines in Mexico, signs are evident that Latin America has seen the worst of the global economic crisis and is poised for solid expansion. The region is expected to post economic growth of 4.1% next year, according to a forecast released Thursday by the United Nations' Economic Commission for Latin America and the Caribbean. That's a stronger rebound than previously anticipated. Emerging powerhouse Brazil is expected to lead the way with projected gross domestic product growth of 5.5% in 2010.

California's jobless rate is close to peaking, but the recovery will be sluggish, with employers not expected to resume hiring until at least next spring, according to new forecasts by UCLA and other analysts. The state's unemployment rate, which hit 12.5% in October, will probably peak at 12.7% this month. Still, it won't fall below 10% until 2012, according to a UCLA Anderson forecast released today. That means California's economy almost certainly will continue to struggle for the foreseeable future.