Cal State Fullerton economists say the economy will be slow-going for the next year or two. The university's Mihaylo College of Business and Economics and the Orange County Business Council today released their annual economic outlook.
For California and the nation, stopping the recession was like stopping a locomotive speeding downhill. It took a while to grind to a halt – and it’ll take a while to chug back up the hill.
Dr. Anil Puri is the dean of Cal State Fullerton’s Mihaylo College of Business and Economics. He says the first three months of this year looked pretty good, but then the economy backpedaled – and growth slowed.
"And so the question now is, how much slower are we going to be for the rest of this year and next year and beyond?" Puri says. "And we think we’re going to continue to grow as we have so far this year, but the growth, for a number of reasons, is going to be slower than anybody would like to see."
One reason is Southern California’s flat job market. Puri says Orange County lost 160,000 jobs in the last three years. Most of the losses came last year, at the end of the recession and after it was over. That surprised economists.
Puri says Orange County finally started gaining jobs in the last three months.
"We don’t expect jobs to be lost. We expect jobs to grow over time," he says. "But they’re growing very slowly and it’s going to take us several years before we recover all the jobs of this last three years."
Puri says many of those jobs will be high-tech, clean tech and exports – sectors where Orange County has a foothold. But he says federal and state budget deficits are a problem.
"State and local governments are burdened with high pension costs and high expenses of all the programs that we’ve undertaken in the last few years," Puri says. "And I think state and local governments are going to be under pressure at least for the next two years because the economy is not going to generate sufficient tax revenue for them to carry out all the programs that they currently have. So there are going to be tough choices to make both at the federal level and the local level in the next two years."
The housing market is a challenge, too. Problems with banks and foreclosures could take months or even years to work out.
And Puri says another challenge is us. We spent like crazy for two decades, living on credit or borrowing from homes. Then the recession – and reality – hit.
"And we are all cutting back. Consumers are cutting back on credit. Banks are reducing their credit limits or not giving credit at all," Puri says. "So this de-leveraging process, both for industries and for household, is in the works right now, but we’re not quite done with that, I’m afraid. It’s going to take some time, maybe a year or two, before consumers feel that their debt balances and their income are consistent and they can start spending again."
Puri points out that consumption is two-thirds of the economy, so how much we spend is key.
The Cal State Fullerton economic outlook is slightly more pessimistic than this week’s UCLA Orange County forecast. But they share a theme: jobs and the economy will get better – but slowly.
Or as economist Anil Puri says, “Just hang in there.”