Uncertainty Clouds California Economy; State’s Recovery Will Mirror That of the Nation
In its March quarterly forecast, the UCLA Anderson Forecast revised its outlook for the U.S. economy downward because of the expected impact of COVID-19, which was then still being referred to as an epidemic. Two weeks later, as the economy began shutting down because of the pandemic, the Forecast released the first revision in its 68-year history to assert that the U.S. economy was already in recession.
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Now, in its second quarterly forecast of 2020, the Forecast team states that the global health crisis has “morphed into a Depression-like crisis” and that it does not expect the national economy to return to its 2019 fourth-quarter peak until 2023.
The National Forecast
“To call this crisis a recession is a misnomer. We are forecasting a 42% annual rate of decline in real GDP for the current quarter, followed by a ‘Nike swoosh’ recovery that won’t return the level of output to the prior fourth quarter of 2019 peak until early 2023,” writes UCLA Anderson Forecast senior economist David Shulman in an essay titled “The Post-COVID Economy.”
“On a fourth-quarter-to-fourth-quarter basis, real GDP will decline by 8.6% in 2020 and then increase by 5.3% and 4.9% in 2021 and 2022, respectively,” he writes.
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Shulman goes on to write that U.S. employment will not recover until “well past 2022” and that the unemployment rate, forecast to be about 10% in the fourth quarter of 2020, will still exceed 6% in the fourth quarter two years later. “For too many workers, the recession will linger on well past the official end date,” Shulman writes.
Shulman’s essay notes that the Federal Reserve acted with unusual alacrity by moving immediately to a near-zero interest rate policy and committing itself to supporting the corporate bond market, among other actions, and that the $1.8 trillion CARES Act moved quickly through Congress. He suggests that more relief will be needed this summer, and although a recovery is eventually forecast, it is expected to be moderate.
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