UCLA economist sees no US recession but weak outlook
WASHINGTON (AFP) — The US economy is likely to skirt a recession based on a widely held definition but will struggle with weak growth into 2009, a closely watched forecast by UCLA economists said Wednesday.
The UCLA Anderson Forecast "cautiously affirms the 'no recession' prognostication it has been advocating over the past several quarters," according to its quarterly update.
"Although the economy will likely avoid falling into a formal recession, the economic outlook through the end of 2009 is decidedly subprime," said senior economist David Shulman of the University of California at Los Angeles.
The forecast indicates a likely increase in the unemployment rate from 5.0 to 5.5 percent, within "recession range," according to the report.
UCLA Anderson Forecast director Edward Leamer said: "I am holding to what is now a shaky view: no recession this year."
Leamer said the rising unemployment rate is more of a "hiring freeze" than massive layoffs associated with an actual recession.
The report predicts that gross domestic product (GDP) could dip into the negative range over the next six to nine months, as the housing bust continues to wreak havoc on the national economy, but that the economy will likely avoid two consecutive negative quarters, a widely held definition of recession.
The UCLA report calls for GDP growth from the third quarter of 2007 through the end of 2009 to average a tepid 1.2 percent.
GDP in the second quarter is expected to show a contraction of 0.7 percent and the first quarter of 2009 "could be negative as well," according to the report.
The forecast report also says that the Federal Reserve Bank is beginning to shift its attention from the financial system, which has been negatively impacted by the housing bust, to its more traditional concern about inflation.
As a result, the UCLA economists see possible rate increases in the middle of 2009.
