The UCLA Anderson Forecast that was released last week was interesting. It is predicting again that the Los Angeles and California economies will not slip down the slope of recession this year, even though they’re uncomfortably close to the edge.
That’s interesting because it contradicts the narrative in the wider world for about a year. You know, all that chatter, mostly in the news media, about how the country was “headed toward” recession “if not already there.” And if you listen to the pundits you’d think poor Southern California, whacked by the housing implosion, is in true economic peril. There’s even been some talk about how some economic conditions are comparable to the Great
Depression. Oh, please.
I said in February and I’ll say it again: Not so fast with all that recession talk.
Sure, a recession may well descend on us. But the point is all the experts’ talk and all the hand-wringing up to this point have greatly exceeded reality. It reminds you of the old joke about how experts have predicted 10 of the last six recessions.
Let’s be clear. The economy is weak at the knees. Has been for a time. But weakness is not recession. It’s the difference between driving forward slowly, say five miles an hour, and driving in reverse. Too many people for too long have blithely shrugged of that important difference (and you’ve got to wonder about the agenda of those who keep insisting we’re in recession).
The U.S. economy has been going forward, albeit slowly. It grew at 0.9 percent in the first quarter of this year and likely will grow at a similarly anemic pace in the second. The classic rule-of-thumb definition of recession is two consecutive quarters of negative growth. The point is we’re not there, at least not yet. The economy has not gone into reverse.
Of course, the National Bureau of Economic Research, the group that officially calls a recession’s start, doesn’t wait for that classic definition and could declare at any time that a recession has started. But the point is it hasn’t made that call. At least not yet.
What’s more, the slowdown has largely been confined to three areas: housing, credit markets and automobiles. If you exclude housing and autos, the GDP in the first quarter grew by 2.5 percent. That’s a nice, normal pace.
The service sector accounts for about 60 percent of GDP, and service GDP increased by 3.5 percent in the first quarter. That’s brisk.
In other words, the rest of the economy did just fine in the first quarter.
The Los Angeles area has, indeed, been hit hard by the housing swoon. On the other hand, the low dollar is boosting exports. The Anderson Forecast believes that should help buoy the local economy and help keep it out of recession.
The forecast goes on to say that unemployment, which in May was 5.9 percent, should top out at 6.1 percent by the end of the year. Personal income growth, which has been flat, should hit 2 percent growth in the fourth quarter.
Nope, those aren’t great numbers. But they’re not Depression figures. Not even recession figures.
We’re not there. At least not yet. Please lighten up on the recession talk.
Charles Crumpley is editor of the Business Journal. He can be reached at
[email protected]
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