California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

The big three economic forecasts from California institutions - UCLA, Chapman
University and from the University of the Pacific have been presented on their
mid year 2009 predictions on the nation and the state.  The following provides
an overview of each.

UCLA Forecast
The UCLA Anderson Forecast upgrades the condition of the national economy,
moving it out of "intensive care" while noting that it is still "very sick."
The Forecast sees the national gross domestic product improving from negative
growth in the second quarter of this year to nearly perceptible growth in the
final quarter while acknowledging that this tepid growth will be accompanied by
an unemployment rate that will continue to rise well into 2010 and into double
digits.

In California, the worst of the recession is beginning to ease, but any optimism
must be tempered by the specter of a state government poised to contract at the
worst possible time. The UCLA report illustrates that overall, California’s economy
has been very weak for the first two quarters of 2009, and will be followed by very
little growth in the last six months of the year. The economy will begin to pick up
in 2010 and return to more normal levels of growth in 2011. The expectation is that
total employment will contract by 3.5 percent in 2009 and will not grow in 2010. The
UCLA forecast illustrates that growth returns in 2011and will rise at 1.8 percent.

Chapman University Forecast
The national recession will end this year, according to the recent economic forecast
by the Chapman University A. Gary Anderson Center for Economic Research. California
entered the recession six months earlier than the rest of the country and will exit
about six months later, said Chapman economist Esmael Adibi. The Chapman forecast
isn't that different from the recent forecast by UCLA which predicted California's
economy would be bleak for another year. Adibi called the Chapman forecast optimistic
because it: Predicts the end of the U.S. recession in September or October of this
year. The Chapman forecast expects the state recession to end in 2010. The report
asks whether government spending can sustain the recovery or whether the economy
will fall back into recession, a so-called W or double-dip recession, as it did in
the early 1980s. The forecast predicts a dip in 2010 but not into recession. The
recovery is shaping up to be an extended U or something more like a Nike swish – up
then modestly forward according to Jim Doti, president of Chapman University.

University of the Pacific Forecast
Job losses in California will top 1 million before the recession ends this fall,
according to the Business Forecasting Center at the University of the Pacific in
Stockton. The state’s overall unemployment rate is forecast to peak at 12.3 percent
in early 2010 and remain in double digits until the end of 2011. The California
economy will finally hit bottom in the fourth quarter, and begin a slow, multi-year
recovery. It will be 2013 before many key economic indicators such as unemployment
return to healthy levels.

“The state budget crisis is a dangerous aftershock to a region still reeling from
the foreclosure earthquake,” says Jeff Michael, director of the Business Forecasting
Center.

On Government Stimulus
"I'm skeptical of government-led growth but I know that reasonable people can
differ on the issue. That underscores the uncertainty," said David Shulman, the
senior economist at the UCLA Anderson Forecast unit, who wrote the report.
"Government policy has been, I think, successful in putting a floor under the
economy. But it may be successful in putting a ceiling over it as well." Shulman said.

"I do not like government stimulus, but the size of this one was so huge," Chapman
University’s Esmael Adibi said. "If you throw that much money at a dead body, it
starts moving.

I am Tim Johnson and this has been the California Business Minute.