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Date: 9/24/2008
Authors: Marc Lifsher and Peter Y. Hong
 
     

News Bite

UCLA economists issue gloomy California forecast

Housing prices will hit bottom some time next year, but the California economy will be in distress for months to come, according to a closely followed UCLA economic report released today. In its report, the UCLA Anderson Forecast predicts that unemployment will continue to increase, consumer spending will decline and tax revenues will plummet.

Economists and business owners said the UCLA forecast -- which predicted the current housing bubble -- matches their expectations and the experiences of Californians. Although the proposed $700-billion federal bailout of the financial system may stop the downturn in housing, it will have little effect on these longer-term trends, several economists said.

The problem is that the housing crash caused severe job losses in construction and finance, and pulled down property values and consumer spending, leading to a shortage of tax revenue for the state. Even if housing levels out, it will take months or years to repair the damage in other sectors.

Government employment declined by 6,000 jobs from July to August, according to state figures. Retail jobs are also being cut in areas such as clothing, electronics, sporting goods and building and garden supplies, the UCLA report said. The forecast also predicts that increased government intervention in the economy will spur inflation and result in higher taxes -- no matter which candidate is elected in November.

Notwithstanding the grim outlook described in the report, the forecasters declined to use the term recession to describe the situation at either the state or the national level.

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