The US economy will suffer as the slumping housing market eats away at job creation and consumer spending, but the nation should avoid slipping into a recession this year, a new economic report said.
A recession could still happen though, if the credit crisis that has stifled the housing market deepens, preventing consumers from buying big-ticket items like cars and businesses from spending on equipment, the quarterly Anderson Forecast by the University of California at Los Angeles said.
"We don't see that happening," said Edward Leamer, director and co-author of the forecast that was released yesterday. "This is a tough call, but I will be very surprised if this thing actually precipitates into recession."
The forecast anticipates job growth remaining sluggish this year, with the US unemployment rate rising to 5.5 percent by the end of the year. The unemployment rate last month was 4.8 percent.
The forecast expects the economy to post GDP growth of about 1.5 percent this year, rising to about 3 percent growth next year. GDP grew 2.2 percent last year, the weakest showing in five years.
The no-recession forecast runs counter to the outlook among many economists and financial pundits, who contend the economy has already started to shrink amid rising unemployment, job losses, record oil prices and the lingering effects of the housing and credit crises.
The US lost 63,000 payroll jobs last month, the second consecutive month of job losses. The last time the US posted a two-month drop in payroll jobs was in 2003, when employers were still struggling through the aftermath of the 2001 recession.
Leamer said the US may be experiencing negative economic growth in this quarter. Economists generally look for at least two consecutive quarters of negative growth before they make a recession determination.
The biggest risk of recession comes from the credit crisis that emerged last year as home values began to tumble and the number of mortgage defaults and foreclosures soared, the economist said.
Another potential factor in a recession would be widespread job losses. Leamer, who has maintained a no-recession forecast in recent quarters, said that is not likely.
"So far the labor markets are slowing but not collapsing," he said.
The forecast says the nation's housing doldrums will continue "for a long time," Leamer said.
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