UCLA Anderson Forecast Asserts Expansion Won't Last Through Bush's Second Term; 'Tepid at Best' Growth for California Forecasted Through 2006

    LOS ANGELES, March 15 /PRNewswire/ -- In its first quarterly report of
 2005, the UCLA Anderson Forecast asserts that the current expansion in the
 national economy is nearer its end than its beginning.  While the report,
 released today, stops short of predicting a recession -- at least exactly when
 the next recession will hit -- it does outline a scenario that points towards
 a slowing of the economy and an eventual downturn.  In California, slow growth
 is expected over the next few years, as a weak housing market offsets some of
 the strengths in other parts of the economy.
     The National Forecast
     In his report, UCLA Anderson Forecast Director Edward Leamer sheds light
 on the current economic expansion via an historical prism.  Leamer points out
 that historically, economic expansions have not lasted very long, with five of
 the last nine lasting only 14 quarters or less.  The current expansion is
 12 quarters old right now and Leamer sees no growth spurt on the horizon that
 will extend it much further.
     In a detailed discussion, Leamer reveals that the three longest expansions
 in history all experienced growth spurts during which the rate of growth of
 GDP was abnormally high and the rate of unemployment was driven down.  Each
 expansion is different, with different stimuli bringing about the growth
 spurt.  But Leamer sees no clear stimuli on the horizon in 2005, ruling out
 both tax cuts (which have already occurred) and monetary stimulus (which has
 also occurred through low interest rates).  An increase in government spending
 is doubtful (unless it is wartime spending), leaving only exports as a
 possible ray of hope.  Exports were a major factor in the length of the Reagan
 expansion, and the declining dollar vs. the Euro should stimulate this sector.
     Leamer concludes with the assertion that a recession is in the future; he
 just doesn't know when yet.  He doesn't see it in 2005, but believes it could
 happen in 2006.
     The California Forecast
     In California, UCLA Anderson senior economist Christopher Thornberg says
 that at best the state economy can be expected to maintain slow growth over
 the next few years as the weak housing sector saps off strength created in
 other parts of the state's recovering economy.  There are some good economic
 indicators in California, however.  The falling dollar has helped keep more
 entertainment production in state instead of moving overseas or to other parts
 of the country.  It has also bolstered manufacturing and tourism.  The high-
 tech industry is in turnaround, with greater employment in this sector just
 around the corner.  Finally, the public sector may be seeing a light at the
 end of the tunnel, with jobs returning in this area as well.
     About UCLA Anderson Forecast
     UCLA Anderson Forecast is one of the most widely watched and often-cited
 economic outlooks for California and the nation, and was unique in predicting
 both the seriousness of the early-1990s downturn in California, and the
 strength of the state's rebound since 1993.  Most recently, the Forecast is
 credited as the first major U.S. economic forecasting group to declare the
 recession of 2001.  Visit UCLA Anderson Forecast on the Web at

SOURCE UCLA Anderson School of Management

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