Housing to tug on area economy

The quarterly UCLA Anderson Forecast noted that a weakening job market, expected budget cuts in Sacramento and the continuing writers’ strike will further pressure the California economy. But economists concluded that “the combination of real estate weakness, government belt-tightening and Hollywood labor disputes all crease a sluggish economy ... but we still do not see enough systemic weakness for a recession.”

According to the forecast, unemployment in California has risen 1 percent -- to 5.4 percent -- since Jan. 1, something that has never been seen outside of a recession. “This is not surprising given the weakness in finance, real estate and housing,” economists Ryan Ratcliff and Jerry Nickelsburg wrote in the report. “What is surprising is that the unemployment rate in the U.S. seems to be relatively stable. For most of 2007 it has either decreased or held steady and it has only begun to increase in the last two months.”

Meanwhile, more recent employment statistics show that the state’s job market may be even worse than the near-zero job growth reflected in the official numbers, with the financial sector seeing as many lost jobs as the construction industry.

But economists predicted that the state’s unemployment rate will peak at 6.1 percent in late 2008, with personal income rising between 1 and 2 percent.

“ ... the rough patch in the major indicators is a little deeper and several quarters longer than our previous forecast -- it gets pretty ugly, but still no recession,” according to the report.

Forecasters also reiterated their position that Writers Guild of America strike will not cause nearly as much economic damage as first predicted. Initial reports put the effects of a prolonged strike at as high as
$1 billion, but UCLA economists said that even if the strike lasts as long as the 1988 strike, the effects will only be about one-third of that $1 billion estimate.