Tags: ucla | recovery

UCLA Study: We're Barely Halfway Through Recovery

Wednesday, 20 Jun 2012 02:33 PM

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The U.S. economy is only halfway through its economic recovery from the worst recession since the Great Depression, the quarterly UCLA Anderson Forecast finds.

While recovery periods after the last ten downturns took about two years, this current one will last eight years in total, the forecast concludes, as reported by CNBC.

The latest recession officially ended in 2009.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

U.S. gross domestic product will grow 2.2 percent this year and 2.4 percent next year, according to the UCLA Anderson Forecast.

Corporate profits will grow in the single digits over the next few years until falling in 2014, and unemployment won't come anywhere near pre-recession levels, dipping to 7.7 percent by the end of next year from today's 8.2 percent unemployment rate.

Blame a poor educational system for the country's economic demise, which isn't new.

Two asset bubbles have been able to keep the economy growing and make up for a shortfalls in the educational system — the Internet bubble of the late 1990s and early 2000s followed by the more recent housing bubble.
Now that both have burst, not enough properly trained workers are out there capable of pushing the economy forward.

Plus many are bogged down by student loans — the total bill of which comes to over $1 trillion — which will prevent the housing sector from growing, dooming it to spend more time bottoming out in limbo for years to come.

"We're experiencing a transition from an industrial to a post-industrial society, and in a post-industrial society, it's the teachers that create the jobs. They're the ones who prepare our students with creativity and problem-solving skills and to perform effectively in the intellectual services that drive wealth formation in a post-industrial world," UCLA Anderson Forecast Director Edward Leamer tells CNBC.

"Frankly we've had a weakness in our educational system masked by two bubbles, first the Internet bubble and then the housing bubble, and there's no bubble that's going to mask it, and the reality is the assets — these intellectual assets take a long time to create."

Federal Reserve action can't help, either.

"My view is that we as a nation just have to sort of suck it up and realize there is no quick fix. Monetary policy has proven itself to be ineffective. We've had incredibly aggressive monetary injections in the system," Leamer says.

He was referring to past Federal Reserve recent policy actions known as quantitative easing, under which the U.S. central bank buys assets from banks, flooding the economy with liquidity to spur recovery and job creation.

Families need to get involved as well.

"We need to get the parents actively involved in the education system. If they're actively involved, I think you'll see the teachers respond," Leamer says.

"As an educator, there's nothing better than affecting some student's life. I think most teachers feel that way."

Meanwhile in California, housing won't even begin to recover until next year.

"The data is just not telling me that the market has turned or is on the verge of turning," says UCLA Anderson Forecast Senior Economist Jerry Nickelsburg, the Los Angeles Times reports.

"California real estate markets are either still in the trough or still declining towards it."

California is home to high unemployment rates, which stood at 10.8 percent in May and won't dip to single digits until the middle of next year, the forecast adds.

Building permits should pick up in the state in the coming years, which could bring spur more lasting recovery in the housing sector.

"Twelve more months of solid gains in California and working through excess inventory, and we should be ready" to declare a housing recovery, Nickelsburg says.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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