California and the R-word
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A new report from Goldman Sachs via MarketWatch raises the R-word in a big way.
Because of a sharp increase in California’s unemployment rate in September, the state seems to be sinking into recession.
Goldman Sachs economist Jan Hatzius suggests that even though at 5.6% the state’s jobless rate is low, it nonetheless has risen 0.9 of a percentage point in the last year. To Hatzius, that’s a bad thing. He believes that Florida and Nevada, two other states whose economies have been powered by housing in recent years, are already in recession.
‘Together with the regional recessions already visible in Florida and Nevada, a California recession would mean that the housing bust has pushed an area responsible for 20% of U.S. gross domestic product into an outright downturn,’ Hatzius said.
So far, this view is an anomaly. Economists at the UCLA Anderson Forecast and elsewhere have stopped short of saying that the housing downturn will push California’s economy into recession. They believe that a second pillar of the economy, such as manufacturing, needs to weaken considerably for that to happen.
Then again, the other scenario for a recession is for the state’s housing market to worsen more than expected.
Thoughts? Comments?
-- Posted by Annette Haddad
Illustration credit: Peter O. Zierlein For The Times
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