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UCLA Anderson Forecast: Recent Good News In Employment Data Calls for "Curbed Enthusiasm" With 2% GDP Growth Projected For the Rest of 2012LOS ANGELES --(Business Wire)-- In its first quarterly report of 2012, the UCLA Anderson Forecast's outlook for the U.S. remains cautious against overzealousness regarding the national economy, while acknowledging an improving employment situation with more than half a million jobs created in the first two months of the year. With the proper restraint in mind, the Forecast calls for a modest 2% growth in Gross Domestic Product (GDP) through the rest of the year. In California, the current forecast sees continued slow steady gains in employment for the rest of 2012, with the rest of the country and the state's international trading partners generating faster growth in 2013 and 2014. The Forecast calls for a steady decrease in the unemployment rate in California over the next two years following a slow trajectory towards single-digit unemployment by the end of 2013. The Forecast projects California's unemployment rate to be 7.7% by the end of 2014. The National Forecast In his March 2012 report, UCLA Anderson Forecast Senior Economist David Shulman cites temperatures in most of the country averaging five to six degrees above normal in January and February 2012 as a key factor in the recent improvement in the labor market, with 227,000 and 284,000 net new payroll jobs created in those same months respectively. In an essay titled "Curb Your Enthusiasm," Shulman details how unseasonably warm winter weather drove the "consumer economy." The impact of the mild winter manifested in several respects, including an unusually low number of workers being kept from their jobs and lower home heating bills (aided by plummeting natural gas prices, which helped offset higher gasoline prices), which acted as stimulants for the labor markets. But, Shulman writes, "We suspect that once the weather and the seasonal adjustment factors normalize in March and April, the economic data won't look so ebullient." Shulman also suggests "the stronger employment data are not appearing to translate into stronger overall GDP growth." He argues that part of the recent gains in employment is in response to prior growth, not expectations for future growth. After experiencing 3% growth in the final quarter of 2011, the UCLA Anderson Forecast predicts real GDP growth to slow to around a 2% annual growth rate for most of 2012, with the point estimate for the first uarter at 2.0%. Growth is expected to improve from that level in both 2013 and 2014. Moreover, the looming expiration of all of the Bush era tax cuts and the payroll tax cut will elevate economic uncertainty in the second half of the year. The California Forecast In the California report, Senior Economist Jerry Nickelsburg looks "under the hood" of the state's employment woes, exploring the nature of California's persistently high unemployment rate and the gap between the state's and the nation's unemployment rate. In an essay titled, "California's Unemployment High," Nickelsburg details how California's unemployment rate is historically the same or slightly higher than the U.S. rate. He also notes the state's penchant for boom or bust cycles creates the temptation to blame the current distance between the U.S. and California's unemployment rates on an excess of construction and related sector workers, just as in the early 90s, when there was an excess of aerospace and related sector workers. A key point in the essay is that the U.S. as a whole saw a decline in its labor force, as discouraged workers removed themselves from actively seeking employment. In California, the same decline in the labor force did not occur and this difference accounts for much of the differences in the unemployment rates between the state and the nation. While acknowledging the importance of California's labor market dynamics, Nickelsburg writes that these findings do not alter the UCLA Anderson Forecast's view of how the California economy is going to evolve over the next few years. In 2012, the Forecast calls for slow growth in employment at about the national rate. When the economy picks up in 2013 and 2014, the drivers of the state's economy will be technology, exports, health care, professional, scientific and business services and education. The forecast is for employment growth of 1.9%, 2.0% and 2.6% in 2012, 2013 and 2014 respectively. Payrolls will grow more slowly, at 1.3%, 1.9% and 2.5% for the three forecast years. Real personal income growth is forecast to be 2.4% in 2012 followed by 2.1% and 3.2% in 2013 and 2014 respectively. For more information on the UCLA Anderson Forecast, click here. About UCLA Anderson Forecast UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state's rebound since 1993. More recently, the Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001. Visit UCLA Anderson Forecast on the Web at http://uclaforecast.com. About UCLA Anderson School of Management UCLA Anderson School of Management is among the leading business schools in the world. UCLA Anderson faculty members are globally renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides a distinctive approach to management education to more than 1,800 students enrolled in its MBA, Fully-Employed MBA, Executive MBA, Global Executive MBA for Asia Pacific, Global Executive MBA for the Americas, Master of Financial Engineering, doctoral and executive education programs. Combining selective admissions, varied and innovative learning programs, and a world-wide network of 37,000 alumni, UCLA Anderson develops and prepares global leaders. Follow UCLA Anderson on Twitter (News - Alert) at http://twitter.com/UCLAAnderson, or on Facebook (News - Alert) at http://www.facebook.com/uclaanderson. |
