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Tuesday, March 11, 2008

UCLA Forecasters: "No Recession"

by Calculated Risk on 3/11/2008 10:52:00 AM

Professor Ed Leamer, Director of the UCLA Anderson Forecast, has a very good forecasting track record. He is arguing that the economy will not be weak enough to be called an official recession, but he is still pretty pessimistic and sees an extended period of sluggish growth.

From Peter Y. Hong at the LA Times: UCLA experts don't buy recession

"We are holding firm: no recession this time," UCLA Anderson Forecast Director Edward Leamer said in a report being released today.
UCLA predicts that GDP will dip by 0.4% in the second quarter of this year, but then rebound.
Unlike past recessions, the economy will not show dramatic improvements after this period of sluggishness, Leamer predicted.

"In the past 10 years, the U.S. economy has had two locomotives," Leamer said. One was the high-tech stock bubble of the late 1990s, the next was the run-up in housing.

"Looking to the future, there isn't another locomotive. There is still not a reason for great optimism," he said.

Home prices will also be slow to bounce back, and the UCLA forecasters do not predict when the housing market will recover.
Interesting. UCLA sees declining real GDP in Q2, but apparently positive GDP growth in Q1. Their primary reason for optimism (such as it is) is that not enough jobs will be lost in manufacturing for an official recession. This is similar to my argument that the the U.S. recession will not be severe (unemployment will not rise far enough), but I'm definitely more pessimistic than Leamer (I think a recession has already started).