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January 2009 Quarterly Forecast
> Near Term Forecast, Levan Efremidze, Economist, UCLA Anderson Forecast
The headwinds of an accelerating U.S. recession during the last quarter did not spare the East Bay economy. The unemployment rate jumped to a seasonally adjusted rate of 8.1% and more than 11,800 payroll jobs were eliminated. A substantial housing downturn has been a drag on East Bay employment since the summer of 2007, but is now beginning to abate. However, the financial crisis of September created an extraordinary uncertainty about the future of the economy and U.S. consumers and businesses reacted with a sharp spending contraction. The financial turmoil and the recession of U.S., the world financial center and largest economy, also spilled over to the rest of the world. The East Bay fully reflects the trends observed in the U.S. and California economies during the fourth quarter.
The comparison of past and current recessions showed that this recession will be unique. The recovery of the East Bay will depend on U.S. consumer spending growth and on the recovery of U.S. trading partners. After several years of zero savings rates, U.S. consumers accumulated a high debt burden that needs to be lowered to a more sustainable level. The national savings rate has already started climbing and it now stands at 3.6%. Our prediction is that the national savings rate will slowly reach 4-5%, thus constraining the growth in consumption and therefore the rapidity of the recovery.
2009 will be a year of increasing unemployment, falling real income and more job losses for the East Bay. The region will lose approximately 26,000 jobs in 2009, the unemployment rate will climb to 8.9% and real personal income will decline by -0.8%. Taxable sales will decline at a -5.8% rate. The East Bay will start the economic recovery at the end of 2009, as the housing market stabilizes and consumption begins to pick up.
Next: "The California Report:
Financial Meltdown and Consumer Uncertainty; From Wall Street to El Camino Real"
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