Anderson Forecast: No Recession Yet, but Worries on the Horizon

The UCLA Anderson forecast has released a statement that claims that the United States economy is not technically in a recession. Citing data from the second quarter of 2008 that showed the gross domestic product had increased by 3.3 percent, the forecast states that the nation is not in a recession by the definition set forth by the National Bureau of Economic Research, but is quick to realize that the economy is “stalled.” The forecast predicts that third quarter GDP growth will be 1 percent in the third quarter followed by a fourth quarter GDP growth of essentially zero. The report’s author, David Shulman, predicted the economy’s growth for several quarters will be below trend as housing prices have yet to bottom out and the real estate market continues to affect the financial sector significantly. Another factor affecting the report’s economic projections are the high gas prices. The report cautions of the combination of high energy prices along with minor wage growth have significantly affected consumers’ purchasing power. The report is cautiously optimistic that the worst of the inflation risks has passed, yet warns that political resistance in the areas of trade and tax policy has the potential to negatively impact the economy. Shulman sees the current banking crisis as a significant factor on the slowing economic growth. “The Fed is in up to its eyeballs with the major Wall Street investment banks and it will be quite awhile before monetary policy will no longer be haunted by the risk of a systemic failure” he writes in the report. The Forecast’s director, Edward Leamer, also weighed in with an accompanying essay wherein he dealt with the issue of recession. “At any moment we could fall into the recession abyss. A future revision in the existing data could reveal that a recession has occurred. We need to recognize that if this doesn’t qualify as a recession, it surely isn’t normal growth.” The UCLA Anderson Forecast is a project of the UCLA Anderson School of Management which provides forecasts for the economies of the United States and California. The report carries significant weight, as it is an independent analysis lacking bias, which distinguishes the report from those of corporations. The report is credited as being the first economic forecast to declare the recession that occurred in 2001.