For months, economists with UCLA's Anderson Forecast refused to say the "R" word - "recession." Now that we're all saying it, the Anderson team predicts we'll keep saying it for a long time to come. KPCC's Brian Watt was in Westwood for the release of the latest Anderson Forecast.
Brian Watt:The forecast's director Edward Leamer began his presentation with a "mea culpa" regarding the last quarterly forecast.
Edward Leamer: I know some of you are angry with me, so, please don't come up and thrash me in the middle of the meeting because we fail to accurately predict this economic downturn.
Watt: Others – like the economists at Chapman University – got it right months ago, and they enjoyed tweaking the Anderson team for being slow on the uptake.
We are "officially" in a recession – and economists generally agree it started at the beginning of the year. But Ed Leamer has a different take, one that sort of defends the Anderson team's refusal to declare "recession" for months.
Leamer: The economy was weak and stumbling forward through the first seven months of the year. And then it just fell off a cliff. And the right time to date the beginning of the recession is not January of this year, but September – or possibly August.
Watt: Whenever the recession started, it's here now – and Ed Leamer says most recessions last about nine months. The longest one in the U.S. since World War II lasted 16 months – and this one could match that. Leamer's colleague, Senior Economist David Shulman, calls it a "balance sheet recession."
David Shulman: Because we've lost $4.5 trillion of home values nationwide. We've lost about $7.5 trillion in the stock market. So there's a $12 trillion hole in consumers' balance sheet.
So in order to restore balance sheets, consumers are gonna have to spend less and save more. The process of doing that cuts consumption and makes the economy weaker.
Watt: Shulman pointed to fresh numbers from the Federal Reserve that show household debt dropped for the first time on record. He says that's a sign consumers are cutting back. It's a cutback felt on the bottom lines of cities everywhere – including Santa Monica.
The city's principal budget analyst – David Carr – attends the Anderson Forecast to help gauge tax revenues. He says Santa Monica's diverse economy has held up during past recessions, but this one could be tougher.
David Carr: You know, one of our primary components of our sales tax is new auto sales. There's quite a few auto dealerships in Santa Monica, and auto sales have really been in the last few months significantly dropping.
Watt: And what will that mean to Santa Monica? David Carr says right now, it's hard to measure the long term impact because the economy is changing so rapidly.