ECONOMIC FORECAST
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Chapman economic forecast, continued ...
And while the median home price in Orange County has dropped dramatically since the start of the recession (it was at about $410,000 in May, according to the most recent report from DataQuick), there’s movement in the market.
“We’re still going to have to deal with some foreclosures, but they’ll be at the current level,” Adibi said. “They won’t skyrocket in 2010.”
The big question is whether the recovery will continue once the stimulus money – $782 billion from the federal government – dries up. If not, another economic decline similar to the recessionary pattern of the early 1980s could occur.
During that period, the economy spiked for a time, then fell again before achieving sustained recovery. But, Doti says, that was mainly due to a jump in the federal funds rate (from 9.8 to 17.8), implemented in the hopes of offsetting double-digit inflation. The government implemented the increase at a critical time – just as the economy was stabilizing.
While double-digit inflation isn’t an issue this time, consumer spending – or the lack of it – could present a problem.
“There’s a huge degree of pessimism with consumers,” Adibi said. “But we’re starting to see a little bit of optimism.”
By September, Adibi said, the signs of recovery will be evident. But consumer spending will still play a key role in the recovery. Doti and Adibi predict that real consumer spending to drop from 72.2 percent to around 70 percent by the end of 2010.
So, instead of rapid “V-shaped” recovery, or a double-dip “W-shaped” recovery as in the 1980s, Doti said, this one will be slow, appearing on a graph like a “Nike swoosh.” (“Hey,” he joked, “we have to look at getting funding anyway and anywhere we can find it. It’s going to be a Nike recovery. You’ve got to say that if we’re going to get any money from a sponsorship.”)
Doti also offered perspective on California’s financial crisis, saying he believed fears that the state government will be forced to file bankruptcy are “overblown.” He also said the projected $24.6 billion deficit that’s been reported is wildly exaggerated. It’s actually about $12.2 billion, and about half of that could be covered by implementing a 15-cent gasoline tax over a two-year period.
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'OC METRO Minute,' June 17: Chapman University's midyear economic forecast
'OC METRO Minute,' June 16: Chapman gears up for economic forecast
Consumer confidence hits highest mark in more than a year
Readers Feedback:
The two year 15 cent gasoline tax should be a non-starter. No tax is ever temporary. It will stay forever and be raised regularly. Better to cut pay rates, headcount, pensions and benefits, programs, and services. This great recession is a perfect opportunity to clean out the stables.
Comment at 6/17/2009
Chapman economic forecast, continued ...
And while the median home price in Orange County has dropped dramatically since the start of the recession (it was at about $410,000 in May, according to the most recent report from DataQuick), there’s movement in the market.“We’re still going to have to deal with some foreclosures, but they’ll be at the current level,” Adibi said. “They won’t skyrocket in 2010.”
The big question is whether the recovery will continue once the stimulus money – $782 billion from the federal government – dries up. If not, another economic decline similar to the recessionary pattern of the early 1980s could occur.
During that period, the economy spiked for a time, then fell again before achieving sustained recovery. But, Doti says, that was mainly due to a jump in the federal funds rate (from 9.8 to 17.8), implemented in the hopes of offsetting double-digit inflation. The government implemented the increase at a critical time – just as the economy was stabilizing.
While double-digit inflation isn’t an issue this time, consumer spending – or the lack of it – could present a problem.
“There’s a huge degree of pessimism with consumers,” Adibi said. “But we’re starting to see a little bit of optimism.”
By September, Adibi said, the signs of recovery will be evident. But consumer spending will still play a key role in the recovery. Doti and Adibi predict that real consumer spending to drop from 72.2 percent to around 70 percent by the end of 2010.
So, instead of rapid “V-shaped” recovery, or a double-dip “W-shaped” recovery as in the 1980s, Doti said, this one will be slow, appearing on a graph like a “Nike swoosh.” (“Hey,” he joked, “we have to look at getting funding anyway and anywhere we can find it. It’s going to be a Nike recovery. You’ve got to say that if we’re going to get any money from a sponsorship.”)
Doti also offered perspective on California’s financial crisis, saying he believed fears that the state government will be forced to file bankruptcy are “overblown.” He also said the projected $24.6 billion deficit that’s been reported is wildly exaggerated. It’s actually about $12.2 billion, and about half of that could be covered by implementing a 15-cent gasoline tax over a two-year period.
<< PREVIOUS PAGE
Related headlines
'OC METRO Minute,' June 17: Chapman University's midyear economic forecast
'OC METRO Minute,' June 16: Chapman gears up for economic forecast
Consumer confidence hits highest mark in more than a year
Readers Feedback:
The two year 15 cent gasoline tax should be a non-starter. No tax is ever temporary. It will stay forever and be raised regularly. Better to cut pay rates, headcount, pensions and benefits, programs, and services. This great recession is a perfect opportunity to clean out the stables.
| Comment at 6/17/2009 |