Economists with the Anderson Forecast at the University of California, Los Angeles, say unseasonably warm weather gave the economy a false lift in January and February, and that economic growth is expected to cool for the rest of the year.
Real U.S. gross domestic product grew at a 3 percent annual rate in the final three months of 2011. In its first quarterly report of 2012, the UCLA Anderson Forecast predicts real GDP growth slowed to an annual rate of 2 percent during the first quarter of the year, and will remain there for most of 2012.
UCLA Anderson Forecast senior economist David Shulman, in an essay titled "Curb Your Enthusiasm," argues that the weather was a key factor in the consumer economy, with low worker absenteeism, plummeting natural gas prices, and lower home-heating bills goosing labor markets.
Although 227,000 new jobs were created in January and 284,000 in February, the stronger employment numbers don’t appear to have translated into stronger growth in GDP.
"We suspect that once the weather and the seasonal adjustment factors normalize in March and April, the economic data won’t look so ebullient," Shulman wrote.
The scheduled expiration of Bush-era tax cuts and payroll tax cut will add to the economic uncertainty in the second half of the year, the forecast notes.
In a separate report on California, UCLA Anderson Forecast senior economist Jerry Nickelsburg theorizes that the state’s unemployment rate is higher than the national average because fewer discouraged workers have left the labor force than in other parts of the country.
Nickelsburg stated that technology, exports, health care, professional, scientific and business services, and education will drive the state’s economy when growth picks up in 2013 and 2014.
The forecast predicts that California’s unemployment rate is on a slow trajectory toward single-digit unemployment by the end of 2013, reaching 7.7 percent by the end of 2014.