With the economy running out of growth drivers, another recession is likely to hit the U.S. economy as early as 2006, according to the annual Anderson Forecast at UCLA.
In the report being released Tuesday morning, economists at UCLA's Anderson School said they're not sure exactly when another recession will hit. But barring a dramatic rise in either business investment or exports over the next few quarters, the economy will likely run out of steam before the end of President Bush's second term.
"The do-not-resuscitate notice was written when the Fed started raising short-term rates in June 2004," said the report written by Edward Leamer, director of the Anderson Forecast.
UCLA forecasters have particular concerns about the California economy, which has been propped up by an active housing market and could lead the national economy into recession if interest rates rise too far.
"This year we are expecting trouble with housing in the second half that will make GDP growth a little weaker than normal, but it (is) unlikely that a recession could get started that quickly without more telltale signs today," Leamer's report said.
In California, fully half of the 243,000 private payroll jobs added over the past two years were directly related to the housing market, noted Christopher Thornberg, an Anderson Forecast senior economist who authored a companion state report.
"The key here is 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 external economy," the report stated. "On the other hand, a sudden rise in interest rates or some other spark that could cause the housing sector bubble to implode at a faster rate could instead cause another recession, both in California and the U.S."
Leamer's report called rising exports "one small ray of hope" for the economy, helping to lengthen economic expansion two decades ago under President Reagan.
Locally, California also has benefited from the weak dollar, which helped stem runaway film and television production, boost tourism and mitigate losses to L.A.'s manufacturing sector, according to Thornberg's report.
In 2004, Los Angeles added about 15,000 jobs, the first year of job growth since 2000, after losing about 100,000 jobs over the last four years. (Most of those have been in low-skill manufacturing sectors such as apparel and food processing).
In a separate survey being released Tuesday, temporary employment firm Manpower Inc. said it expects Los Angeles area employers to hire at a slower pace in the second quarter of 2005 than the like period last year trailing other parts of the country.
In Central Los Angeles, 12 percent of employers interviewed said they plan to increase their workforces in the second quarter, while 13 percent said they would cut back. Another 58 percent expect to maintain current staffing levels and 17 percent were not sure.
While the pace of hiring is slightly better than the 8 percent reported in the first quarter, "employers are much less positive about hiring than they were a year ago, when 45 percent of companies surveyed thought employment increases were likely," said Manpower spokeswoman Jennifer Bolin, in a statement.
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