UCLA Anderson Forecast says country has entered a recession; downturn will hit Calif. hardest

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The UCLA Anderson Forecast economists announced Monday the country has entered a recession, and it’s expected to be more severe in California than nationally.

The revision marked the first time in the 68-year history of the Anderson Forecast that the economists have published an updated outlook between its regular quarterly releases.

The downturn ends an expansion that began in July 2009.

The revised forecast, which incorporates data reflecting a rapidly changing U.S. economy together with a review of the 1957-58 H2N2 influenza pandemic, is for the recession to continue through the end of September.

“After a solid start to 2020, the escalating impacts of the coronavirus pandemic in March have reduced the first-quarter 2020 forecast of GDP growth to 0.4%,” according to the Anderson Forecast. “GDP growth for the second quarter of the year is now forecast to be at a negative 6.5% growth rate, and at negative 1.9% for the third quarter.”

Robert Shulman, a UCLA Anderson Forecast senior economist, and his colleagues, revised the quarterly forecast for the first time in the institution's 68-year history.

The downturn will be slightly more severe for California as the state has a larger proportion of economic activity in tourism and trans-Pacific transportation, according to the Anderson Forecast.

Employment in the state is expected to contract by -0.7% in 2020 with the second and third quarters contracting at an annual rate of 2.6%. The unemployment rate will rise to 6.3% by the end of this year and is expected to continue to increase into 2021 with an average for 2021 of 6.6%. By the first quarter of 2021, California is expected to lose more than 280,000 payroll jobs with more than one-third of those in leisure and hospitality and transportation and warehousing.

The forecast was issued with caveats looking to both more negative, and more positive scenarios.

“If the pandemic is much worse than assumed, this forecast will be too optimistic,” the Anderson economists said. “If the pandemic abates quickly because of the extraordinary measures being put into place to address it, an outcome that the medical community thinks unlikely but possible, then the forecast is too pessimistic and economic growth in the third and fourth quarters of the year will be higher.”

With the assumption of an end to the pandemic and repaired supply chains by this summer, the Forecast predicts the resumption of normal activity in the fourth quarter of the year and a GDP growth rate forecast at 4.0%.

For the full 2020 year, it is expected that GDP will have declined by -0.4%. In 2021, with the abatement of governmental pandemic expenditures and the continued contraction of residential and commercial construction, the economy is forecast to grow at only 1.5%. The full recovery and return to trend is now expected in 2022.

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