Recession or slowdown forecast

The UCLA Anderson Forecast meet yesterday with the suggestion that there are signs of economic slowing. California and the state budget - and therefore - the UC budget would not be immune to such effects. Our incumbent governor - and ex officio regent - who, even in good times can't seem to make up his mind about such things as high-speed rail (or even vaccines), may have to deal with whatever occurs. As lieutenant governor, he was always against tuition increases - even when state budget allocations to UC were being cut.

NEWS RELEASE:

UCLA Anderson Forecast Says Economy May Be Weaker Than It Looks

Focus is on potential recession, slower economy and trade war

Los Angeles (June 5, 2019) — In its second report for 2019, the UCLA Anderson Forecast offers new recession predictions based on the most recent GDP data and the most recent bond market data. While the U.S Department of Commerce release of a 3.1% rate for GDP in the first quarter was celebrated as evidence there is no recession in the near future, a closer look at the details behind that 3.1% number leaves little reason for celebration. Similarly, recent employment data may not appear as robust as reported, which affects the outlooks for the nation and California.

The current Forecast opens with a paper on research by UCLA Anderson Professor Emeritus Edward Leamer that searches for recession precursors. “The first step toward making a recession forecast is looking at what was unusual in the four quarters before recessions,” he writes. Some of the most reliable indicators include weak residential investment and intellectual property (three quarters prior to recessions), and weak residential construction and consumer durables (two quarters before recessions.)

An inverted yield curve also emerges as an important and well-known part of a recession alarm.

According to Leamer, “The effect of the first quarter of 2019 data is to increase the recession probabilities from near zero to 15% for the next year and to between 24% and 83% for the year after that. In addition, the expected number of quarters remaining in this expansion falls from 7.1 to 5.5 when the first quarter of 2019 data are included. That is just one quarter beyond a single year. In other words, “don’t worry about the coming year; worry about the year after that.”

 
 We were warned by Jerry: