A slowing real estate market in California will hurt the state’s economy, according to the University of California, Los Angeles, economic forecast.

The UCLA Anderson Forecast, which also reports on national and local expectations, projects that 200,000 jobs will likely be lost in California’s construction sector “as residential construction and remodeling slow markedly,” according to an announcement today.

Christopher Thornberg, senior economist for the forecast and author of the California forecast, said, “The only debate now is how hard a landing there will be and what will it mean for the general economy.” In his report, Thornberg calls for a rise in the state’s unemployment rate, from 5.6 percent in fourth-quarter 2006 to 6.3 percent in fourth-quarter 2007.

“On the positive side, the report says that jobs in professional services are growing and even though the manufacturing sector is not adding many jobs, output continues to rise. While the cooling housing market certainly has a significant downside, it is actually beneficial for export-oriented California,” according to the announcement.

Nationally, “a meaningful slowdown for the U.S. economy is in the offing for late 2006 and early 2007,” according to the forecast. But the forecast does not predict a recession.

David Shulman, a senior economist for the forecast, expects real gross domestic product growth of 3.2 percent, 2.4 percent, and 3.2 percent in 2006, 2007 and 2008, respectively. There is a risk, he stated, “that the slowdown we envision turns into something worse.”

Titled “Too Complacent,” this national forecast states that higher short-term and long-term interest rates, an approximately flat yield curve, weakness in the housing sector and higher energy prices contribute to an overall weakness in the economy. Shulman concludes that part of this weakness will be offset by strong capital spending and a leveling off in the decline of net exports.


Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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