In a report on the national economy, UCLA Anderson Senior Economist David Shulman stated, the economy would likely avoid falling into a formal recession, and the current economic turbulence was here to stay through the year of 2009 which was decidedly caused by sub-prime. Director Edward Leamer of UCLA admitted, though the situation was shaky, he would stick by the forecast of no recession this year.
Even though the ill-effects on the economy would last for several quarters, the country is likely to post a marginal average GDP growth of 1.2 percent from the third quarter of 2007 through the fourth quarter of 2009. The overall study on the economy claimed the 5.5 percent unemployment rate of last month is likely to increase by half a percent by the end of next year.
Nevertheless, the weaker exchange value of the dollar is indicating that the situation has warranted difficult times for the U.S economy to continue to consume more than it produces, the report said. As a result of dollar depreciation, net exports were on the upswing, adding close to 1 percent to total GDP growth that was good enough to stave off recession, the report added.
However, the economists are confident that through the remainder of this year and 2009, the country would be able to overcome the crisis. And they compared the recessions of 1990-91 and 2000-01 which the country successfully subdued. In both occasions they were largely sparked off by asset price declines, commercial real estate prices in the former and dotcom bubble burst in the latter. The sudden plunge in the housing prices which is considered to be the worst tumble since the Great Depression, so far has wiped out about $3 trillion in home equity.
The skyrocketing of oil prices as well as food prices have become major hurdles to stabilize the economy. On account of various other factors the inflation would remain uncomfortably high over next several quarters, though recession forecast is outright rejected, the report further added.