Housing Slump Seen Beginning to Pinch Consumer Spending, Jobs
The U.S. economy is not in a recession, but with the housing correction stumbling into a second leg as a result of the emergence of subprime market woes earlier this year, economists at the UCLA Anderson Forecast are now saying that the economy is “certainly close” to recessionary conditions.
In its second quarterly report of 2007, the Anderson Forecast predicts that real growth in the gross domestic product will be 1.8% for the year, “roughly on par with the near-recessionary environment of 2002,” when real GDP advanced at 1.6%.
The forecast calls for “the housing-induced sluggishness in the U.S. economy to last into early 2008,” followed by a return to around 3% GDP growth by mid-year.
In the meantime, weakness in the real estate sector is expected to hold payroll job growth in California to less than 1% for the next five quarters and dampen consumer spending across the country.
In his report, UCLA Anderson Forecast Senior Economist David Shulman notes that if the current forecast is accurate, then the period from the second quarter of 2006 through the first quarter of 2008 will mark an unusually long period of below-trend growth by historical standards.
Shulman also concludes that the Federal Reserve won’t be providing any monetary policy help in the form of an interest rate cut until the fourth quarter of this year as it continues to follow an informal policy of inflation targeting that dates back to the mid-1990s.
The housing recovery will be relatively flat, resembling an “L” rather than the customary “V,” he says, because of subprime market tribulations.
With housing and consumption both “down,” the strength of the national economy lies in developments in the rest of the world, according to the forecast.
“The global economy is booming,” Shulman writes. “Indeed, it is the strength of the global economy that is powering the stock market to new highs (and) it is no accident that the Wall Street rally is being led by the giant global corporations who are benefiting most from the worldwide expansion.”
Want to Know the Housing Forecast for the Top 100 Metros?
Find out in HousingEconomic.com’s 2007-2008 Metro Forecast (free preview). Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables.
To learn more, visit www.HousingEconomics.com.
NAHB Kit Gives Builders Back-to-Basics Tips in Cooling Market
With the current cooling of the nation’s housing market expected to persist into next year, NAHB has developed a comprehensive online toolkit geared to providing association members with information that will help them prosper in today’s changing business environment.
To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar.
For assistance, call the NAHB Member Service Center at 800-368-5242.