UCLA expects stronger economic growth with big gains for state
The U.S. economy is ready to stage an earnest comeback this year — led by housing starts and auto sales — and California stands to grab a large proportion of the gains, UCLA economists predict.
Although employment growth slowed at the end of last year, the employment picture this year is expected to brighten, helping the U.S. and California shake off their economic doldrums, according to the quarterly UCLA Anderson Forecast released Wednesday.
Despite recessions in many Eurozone nations and a slowing in exports, the U.S. economy “seems poised for real growth,” said David Shulman, a senior economist with the Anderson Forecast.
Some head winds remain, however — namely the automatic federal budget cuts that kicked in March 1, which have not yet been fully felt. The cuts, also known as sequestration, are expected to dampen economic activity somewhat but not to the extent the Obama administration has outlined, Shulman said.
He also said he expected a compromise of sorts to emerge from Congress this spring.
“Most of the negatives will actually be negated,” he said. “It’s not an apocalypse as the president suggests.”
In their first forecast of 2013, UCLA economists predicted housing starts nationally will top 1 million units this year. Housing starts rose to 781,000 units last year, up nearly 28% from 2011.
“Housing led the downturn,” Shulman wrote. “It is now leading the upturn.”
Consumers will also lend the economy a hand, purchasing more cars this year, economists said.
With Americans’ balance sheets improving, 15.2 million light vehicles are expected to be sold this year, a solid 5.5% increase over 2012, the forecast said.
The country’s gross domestic product — the total value of goods and services produced — is expected to grow 1.9% this year, 2.8% in 2014 and 3.1% in 2015.
This recovery, economists noted, has seen historically low GDP growth rates of about 2% annually over the last four years. Previous economic recoveries saw annual growth rates of 4% to 6%.
As a result, productivity is expected to be flat, said Stephen Oliner, a senior economist with the Anderson Forecast and a resident scholar with the American Enterprise Institute. Productivity is a measurement of output per hour worked.
“Any analysis that involves longer-term economic projections should recognize that, in all likelihood, the United States will be a slow-growth economy for some time to come,” Oliner wrote.
Still, once the economy gets moving again, California is expected to capture a disproportionate share of the gains, senior economist Jerry Nickelsburg wrote.
Increased business investment and exports will drive the California economy, Nickelsburg said.
In his report, Nickelsburg noted that despite a slowing global economy, California manufacturers have held their own in the marketplace. Exports from California have grown during the recovery, he said.
“California has not lost its edge,” he wrote. “Has it lost it over the year? Perhaps, but there is as yet no statistical evidence of it.”
Meanwhile, employment growth is expected to remain steady, despite a slowdown at the end of last year. The Golden State had been adding jobs at a steady clip through the middle of 2012, but the yearly growth rate slowed to 1.6% in December.
Nonfarm payroll growth is expected to be 1.4% this year, helping push the unemployment rate down to 9.3% by the end of 2013. After that, payroll growth is projected to be slightly more than 2% in 2014 and 2015.
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