For three consecutive quarters, the UCLA Anderson Forecast presented two potential scenarios for the U.S. and California economies. One path anticipated aggressive inflation-fighting action by the Federal Reserve that would push the economy into a mild, near-term recession, the other allowed for less impact from the Fed’s interest rate increases that would result in a slowing economy and no recession. While many economists held fast to a recession prediction, the UCLA Anderson Forecast viewed it as a 50-50 proposition.
In the latest U.S. report, the UCLA Anderson Forecast foresees a weak economy in 2024, followed by a return to trend growth rates, albeit below trend GDP levels, in 2025.
But no recession.
In California, the forecast narrative is much the same. Throughout 2023, the state’s economy stood at a fork in the road similar to that of the nation, and the possibility of a short-term recession loomed. But the state’s economy keeps chugging along, thanks in part to consumers who want to spend and stimulative fiscal policy. As in the national forecast, the current UCLA Anderson Forecast for California sees no recession in the near term...
Full release at https://www.anderson.ucla.edu/news-and-events/press-releases/no-recession-ucla-anderson-forecast-foresees-weak-us-economy-2024.
A personal interpretation. The most unusual post-pandemic characteristic of the economy has been the strength of the labor market. Even when real GDP has dropped, once we got past the shutdown, there have been chronic labor shortages and low unemployment rates. There could be several reasons for the shortage. But note that when you start from a labor shortage, a negative shock to the economy (as occurs when the Federal Reserve raises interest rates), mainly expresses itself in "laying off" vacancies rather than real workers. So, the labor market will appear very resilient and resistant to shocks - which is what happened.
The labor shortage in part reflected the aftermath of the pandemic. It appears that older workers, who were close to retirement, in effect took early retirement and did not return to the labor market. Moreover, there have been changes over time in the composition of jobs that are available, notably in "gig" work such as Uber and Lyft drivers. Gig workers share in the revenue collected; that is how they are paid. So anyone with a drivers license - and who Google determines is not a axe murderer - has a standing job offer available. (Even if you don't have a car, Uber and Lyft will arrange to lease you one.) You can drive people around and make whatever that effort yields. There is a standing job on offer.
Of course, there have always been folks who work on revenue sharing, e.g., real estate agents, various sales workers on commission, etc. But the gig labor market has substantially expanded.
Beyond the gig story, there are other changes that have accrued over time in the labor market which make chronic labor shortages (always available job openings) more likely, as my colleague Chris Erickson and I analyzed some time back:
We argued that the weakening and decline of labor unions leads to the kind of chronic seeming labor shortages that we have seen in recent years. It's true that in the past year or so, there has been a rise in labor union activity, e.g., the Hollywood strikes. But unionization in the private sector is currently very low, despite the headlines. Of course, that situation could change. However, within the time frame covered by the UCLA forecast - typically a couple of years - a dramatic change is unlikely.
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