California State University, Fullerton economists said they have an upbeat outlook for the U.S. economy through 2015, but tempered their optimism with some caution.
The economists expect a slow, but steady, sustained expansion in economic activity for the U.S. and in the Southern California region through 2014. And their forecast is for the economy to improve at a quicker pace in 2015.
The forecast authors are Anil Puri, director of the Center for Economic Analysis and Forecasting and Dean of the Mihaylo College of Business and Economics at CSUF; and Mira Farka, co-director of the Center for Economic Analysis and Forecasting and an associate professor in the Department of Economics.
Farka said the recent government shutdown tempered the forecast.
"That's what has actually darkened the outlook a little bit for the fourth quarter of this year and for early in 2014," she said.
But Farka doesn't expect what the report called "political bungling" to bring another shutdown when the fiscal policy wrangling begins again next year.
Farka said Southern California's economy will follow the national trend, continuing to add jobs as the unemployment rate drops through 2015. She said the six-county region (Ventura, Los Angeles, San Bernardino, Riverside, Orange and Imperial counties) is expected to gain 106,000 jobs in 2013 and an additional 142,000 (a 2.1% increase) in 2014.
"Most of the damage caused to the region by the Great Recession of 2008-2010 has been repaired," the report states.
Farka termed the economic recovery "sluggish" when compared to previous U.S. economic recoveries.
"We expect a steady, sustained expansion in economic activity that accelerates gradually over the forecast horizon, tentatively for the balance of 2013 and early in 2014 but more robustly after that," according to the report. "To be sure, our outlook does not call for a return to the 'old normal' -- a post-recession, above-trend growth of 4-5 percent. Rather, the gradual but continued improvements should deliver growth that is a little less 'abnormal' than what we have seen up to now."
While the report said the housing recovery has staged a "spectacular comeback over the past year and that growth should continue to expand," Farka added that the rapid rise in median home prices over the past year will slow in coming months.
According to the forecast, the U.S. economy "managed to survive a number of crises and near-calamities: a full-blown, sovereign debt crisis in the Eurozone; a dramatic 'debt-ceiling' debacle ending with a historic downgrade of U.S. credit rating; a near-headlong plunge over the 'fiscal cliff;' across-the-board, ill-designed, sequester-related cuts; two U.S. election cycles; and countless political wrangling over the Affordable Care Act and other issues which could have weakened a normally functioning economy."
The optimistic U.S. economic outlook is tempered by the lack of job creation during the recovery. And the authors said that 60 percent of the new jobs created through August 2013 were part-time positions.
But Farka said more recent data, although anecdotal, shows that trend may be reversing, with more full-time jobs being added since that time.
"Going forward, we expect the labor market to improve over the forecast horizon, a bit more slowly in 2013 but at a slightly faster clip in 2014 and 2015," according to the report.
Orange County, Southern California will add jobs
The report said the Southern California region should add jobs in the rest of 2013 and next year, with more of an uptick in hiring during 2015.
"Our Orange County projections are for a gain of 28,200 payroll jobs (a 2.0% increase) in 2013 and an additional 35,900 jobs (a 2.5% increase) in 2014," the authors predict. "The six-county Southern California region is expected to gain 106,000 jobs (an increase of 1.6%) in 2013 and an additional 142,000 (a 2.1% increase) in 2014."
The report also expects unemployment rates to decline going forward:
"The average annual rate for Orange County is expected to be 6.1% in 2013 and 5.6% in 2014, while for the Southern California region, the forecasted annual unemployment rate is 9.6% for 2013 and 9.2% for 2014."
U.S. and Southern California home prices and construction
The authors said that the dramatic increase in home prices in Southern California over the last year may not last and home construction may also slow as "uncertainty over interest rates and the overall economy appears to have caused builders to become more cautious, especially for the balance of 2013 and early into next year."
"The rise in home prices and home construction will continue on the upswing, but at a slower pace then we've seen recently," Farka said. "Affordability is still high for both the national and regional home markets."
"The first half of 2013 has shown a much slower pace of increase in permits in all areas of the [Southern California] region and we expect that the permit activity for the year will not match the 2012 levels," according to the report.