UCLA Anderson Forecast Issues a Recession Watch

A newly released analysis of the Trump administration’s economic policies leads the UCLA Anderson Forecast to issue a recession watch, according to a recent press release. While there are no signs of a recession happening yet, it is entirely possible that one could form in the near term. Authored by UCLA Anderson Forecast economist Clement Bohr, the study delineates the factors that led to this watch.

From the post-Civil War recession of 1873 to today, recessions have occurred when multiple economic sectors contract at the same time. The new study notes that:

• The current reduction in the workforce resulting from new immigration policy will create labor shortages in agriculture, healthcare, leisure and hospitality, and construction.
• The new tariff policy will engender higher prices for automobiles, apparel, electronics and the inputs to manufacturing.
• The downsizing and restructuring of the federal government will reduce employment in government and at government contractors.

If these and their consequent feedback into the demand for goods and services occur simultaneously, they create a recipe for a recession. However, if the impact of these policies is sequential, then a 1995-style slowdown might be possible. As this trifecta of dramatic policy changes has not been experienced before, there is no data to indicate which will happen. Consequently, the Anderson Forecast is on recession watch.

Historically, recessions occur when multiple economic sectors contract at the same time. Current factors to consider include: a slowdown in the manufacturing sector; reductions in the work force because of immigration policy; and cuts in federal government employment.

UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state’s rebound since 1993. The Forecast was credited as the first major U.S. economic forecasting group to call the recession of 2001 and, in March 2020, it was the first to declare that the recession caused by the COVID-19 pandemic had already begun.

Information for this article was sourced from PR Newswire.