An economics expert told a Santa Barbara audience May 3 his forecast for the coming year is that conditions won’t change much, as the job market slowly recovers, growth remains slow and inflation low.
Peter Rupert, chairman of the UCSB Department of Economics, presented that prediction for the county for the second year as the director of the UCSB Economic Forecast Project. Several hundred business and civic leaders heard him speak at the annual county Economic summit at the Granada Theater along with three Federal Reserve Bank officials and a Financial Times managing editor.
However, most of what Rupert discussed was the difficulty in making an accurate forecast because of the lack of current data. Most of the economic data he used came from local real estate and business officials, with some Google analytics thrown in for good measure. With that, Rupert concluded, the county’s gross domestic product, or GDP, will grow about 1 percent or less.
Based on state employment data, the “jobless recovery” from the 2008 recession will continue into 2013. “Whatever politicians do, whatever the Fed does, whatever the Treasury does, the key is to keep us on this growth trend,” Rupert said. He said he is an optimist, “But we’re in deep trouble” when it comes to negative GDP growth.
Rupert said Santa Barbara County is somewhat insulated from the recession. However, he said he still is concerned about the county’s negative real GDP since the onset of the recession in 2008. The county’s real GDP since 2005 has declined at an average rate of 0.18 percent, while there has been no real gain in residential investment over the past four years.
After severe recessions, the economy usually recovers gradually. However, Rupert said, this is the slowest recovery since the Great Depression, Rupert said.
Rupert said county housing prices recently dropped 3.6-percent after a small rebound. Unemployment is 8.9 percent and retail spending is flat. While the jobless rate has improved by 1 percent compared to this time last year, some of that may be because discouraged workers have just dropped out of the labor market, Rupert said. Most of the county’s job growth comes from unskilled, $20,000-a-year jobs.
After Rupert spoke, the director of research for the Federal Reserve Bank of Atlanta, David Altig, warned housing prices might drop again when foreclosed homes come back on the market.
Nationally, he said, more publicly held federal debt is out there than in any other recovery, as banks hold onto $1.6 trillion in reserves and the U.S. Central Bank balance sheet has grown to $3 trillion, compared to its $800 billion before the recession.
On the other hand, local housing prices should stabilize, the information technology industry output increased by more than 10 percent, and business sentiment is slowly improving, he said.
Also speaking at the economic summit was Charles Plosser, president of the Federal Reserve Bank of Philadelphia, who predicted a 3 percent increase in national economic growth this year and in 2012. He said inflation would hover around 2 percent while U.S. unemployment may come down to 7 percent by next year.