UCLA on recession risk: "Don't worry, be happy"

As promised, I gave the UCLA Anderson Forecast a quick read for better understanding of why the Wizards of Westwood don't see a recession.

In brief, it's an analysis you've heard before: There won't be a recession because the housing downturn is "mostly confined to housing." Construction employment is weak, but the labor market is not collapsing. We'll muddle through, the economy stalling but barely avoiding recession.

In housing, the forecast sees jingle mail as a noteworthy trend that reinforces the belief that the job market is OK: "This time people are walking away from their homes not because they lost their jobs, got divorced or had health problems, but only because declining home prices have turned their net worth in the house negative, a financial burden to carry into the future or turn over to the lender, whichever they desire. Many have chosen to walk way."

Unfortunately for those hungry for data on the "walking away" trend (is it real or anecdotal?), the report doesn't attempt to quantify the extent of jingle mail.

The headline quote really is in the report, part of Ed Leamer's breezy conclusion: "The data don't yet add up to a recession, and there is nothing here to challenge the basic story of sluggishness that we have had for two years. Don't worry, be happy. You have to avoid recession depression."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: US Presswire

Comments

[GeekSeek]

If the rumor is still alive -- the writer/performer of the song did not kill himself. Apparently a Persian-Indian spiritual leader, Meher Baba, used to send cards back to his followers in America with his photo and "Don't worry, be happy." Bobby McFerrin saw this and the song was born.

Per Snopes, the writer of "Pack up your troubles in your old kit bag and smile smile smile" did kill himself, however.

Check out Meher Baba's picture. It's even more soothing than tree of the week.

http://tinyurl.com/2j47cb

Ucla cheerleaders, cute.

Norouz is here -- maybe it will take the edge off.

[Bubblewatcher]

Look, I work at UCLA and everybody knows we've got across-the-board 10% cuts coming, beginning in June, with probable layoffs. These morons need to come down out of their ivory tower and have a nice, long chat with their administrative assistants in order to determine just how much this recession won't be confined to housing.

The scary part is that I think they're managing my pension plan. Argh.

[Michael Snyder]

"...Roll another one, just like the other one..." Housing woes contained to the housing market my *ss These "geniuses" need to log onto the web & catch a little news about the turmoil in the bond market. Uncertainty brought on by the housing debacle has rattled bond/credit markets all the way to Russia. If "jingle mail" is a healthy sign, rainbows by their nature must have one end at Fort Konx. I think the long term effects of smog are far worse than we thought. Or maybe it's the UCLA experience that puts your head in the clouds. Either way somebody's oxygen deprived, or maybe they're "just gettin' down to it".

[John Haberkorn]

Yeah right.

UCLA Economics was a respcted source for local forecasting, but then Thornburg left. Too bad.

[Maggie Knowles]

Glad to read this good news... except I came across this bit of news:

JPMorgan says nation is in a recession
The investment bank's chief U.S. economist says the country is in a 'short' recession that started in January.

JPMorgan (JPM, Fortune 500) anticipates the current recession remaining short, unless there is an "abrupt change in corporate behavior."

In a short recession, the bottom occurs at about five months, Thomas Lee an analyst with JPMorgan wrote in a research note. Lee said during typical "short" recessions, equity markets gain about 12% in the year following the bottom.

Lee said if the recession lasts more than 12 months, stocks are likely to have additional downside. Only eight of the 22 recessions since 1900 have lasted longer than a year, Lee added.

go here for the rest of the article:
http://money.cnn.com/2008/03/07/news/companies/
JPMorgan_recession.ap/index.htm?section=money_
news_economy
or
http://tinyurl.com/3ccsxw

[CD]

Contained to the housing sector ??That's what Paulson said back in August. What month is it in Westwood?
I told you those guys at UCLA get to try all the new experimental drugs first, wonder what they are taking now.....

[JohnnyB]

"the UCLA Anderson Forecast holds steadfast to the basic tenet of a forecast they have been making throughout the year"...

Keep holding steadfast to the basic tenet... seriously, keep on holding steadfast.

"Forecast Economists Ryan Ratcliff and Jerry Nickelsburg foresee... no recession in California"...

I'm so relieved... keep up the good work you two!

Wouldn't want you to get your hands dirty digging a little deeper in the data... nor blinding your eyes by looking at what's happening around you.

Let me guess... it depends on your definition of "recession".

[anonymous]

From the April 2007 Forecast at UCLA/Anderson

Looking back, he writes, “ … the historical record suggests that a spike in defaults does not automatically imply a surge in foreclosure sales.” The report recalls two such incidents of high foreclosure rates, one in the 1980s and another in the 1990s. Ratcliff suggests that while it’s too early to tell, today’s combination financial excess in an otherwise relatively healthy economy may more closely resemble the 80s, when many households experienced delinquencies but avoided foreclosure.

Okay, There you have it. You'll see no spike in foreclosures in 2007/2008. Thank goodness we have the Anderson school to tell us what's what.

[JR]

My aunt is a follower of Meher Baba, the movement has continued after his death, and one Christmas many years ago, my sister and I received bright orange t-shirts from her with "Don't Worry, Be Happy" emblazoned across the front. I don't think I ever wore it.

[GeekSeek]

A mathematician, an accountant and an economist apply for the same job.

The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."

Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four - give or take ten percent, but on average, four."

Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, "What do you want it to equal"?

[Grim Reaper]

Anyone can make a prediction and we won't know the answer until it is over.

The recession is coming and will get you too!

[longdriver]

And I was thinking os sending my daughter to a UC school. I hope the Vet dept at Davis is better than the Economics dept at LA...

I hope they are right but considering that every furniture store in the IE has a going out of business sale on the window I'm not very hopeful. Norco Chrysler and Loma Linda Saturn are going belly up. Every gov agaency is making plans to either freeze hiring or make cuts. Nothing I're read in the last few months indicates any hope of us avoiding the big R.

[Keith - letitsink.blogspot.com]

Walking away is real. I know it is because I know a guy who just got approved for the mortgage on the house he is walking to. That is an anecdote of course, but it's real. The public is slow in realizing that anything is changing. Even though there is a year or more of inventory on the market, people still think this is going to blow over. In 6 months or a year when it becomes obvious to the thickest American that this price decline is real, you'll really see people jumping ship. And what will fuel it is the anecdotes. Nobody wants to look like a fool, paying off a ridiculous mortgage only to help Mozilo and his greedy peers.

[adoptivefather]

Off topic somewhat but the LAT doesn't have the guts or the brains to provide blog on illegal aliens effect on all of us.

How is this related to real estate?

The woman featured below admits to stealing between $20,000 and $25,000 tax free AND thus so is able to afford $2,300/month rent payment.

Doesn't that scenario artificially inflate real estate values.

Scavenging to survive in Pasadena

Email Picture
Anne Cusack / Los Angeles Times
Juana Rivas, 47, takes to the streets in and around Pasadena between 3 and 4 a.m., five days a week, to collect recyclables.
To support her family, an undocumented worker gathers recyclables from street-side containers. 'I do it out of necessity,' she says.
By Anna Gorman, Los Angeles Times Staff Writer
March 12, 2008
It's not yet 3 a.m. Juana Rivas grabs her shopping cart and steps off the curb into the dark.

She shields herself from the cold with a sweat shirt and jacket, along with a pink hat and gloves she bought at the 99-cent store. Only a barking dog interrupts the silence.

Interactive Feature
Cans and bottles
(Flash)
Rivas arrives at the first house, lifts the trash can lid and shines her flashlight inside. Nothing.

"No hay. No hay," she says in Spanish.

She peers into another trash can. Nothing. She zigzags back and forth across the street, stopping at each house to search for aluminum cans, glass bottles, plastic containers, anything she can exchange for money at the local recycling center. She reaches inside and shakes the contents, listening for the telltale clink of a beer bottle or the hollow tap of a milk carton. Nothing.

She starts to feel anxious. Her husband and four children are depending on her. The $2,300 rent check on their Pasadena home is due in one week. She already asked for an extension on the gas. The cable and the phone have been disconnected.

She speeds up the pace. The plastic bags attached to the cart swoosh against one another. The wheels rattle as they roll over pebbles in the street.

A few minutes later, she finds an empty Sierra Mist can, a few plastic water bottles and several Foster's beer bottles. She dumps them into her empty cart.

"There are bad days and good days," says Rivas, 48.

As she walks toward the next house, she says, "It's going to be a bad day."

Rivas knows what people think, that she digs through her neighbors' trash to make money for drugs or alcohol. She knows what people call her -- scavenger, digger, thief.

"There are people who look at me like, 'You aren't worth anything. You aren't anybody,' " she said.

For 13 years, she says, she has collected cans and bottles "to pay my rent, my bills. I do it out of necessity."

She has looked for more stable jobs, including cleaning offices at night. But nowadays, more companies are asking for immigration papers, papers she doesn't have.

Besides, scavenging pays OK, she says. The more hours she puts in, the more she earns. Her proof is in her recycling center receipts: Oct. 22: $70.12. Dec. 12: $143.08. Jan. 4: $134.91. Overall, in a year she might earn between $20,000 and $25,000. Combined with what her husband earns and what her children contribute, they can meet the rent and put food on the table.

Rivas is part of the expanding underground economy -- the hundreds of thousands of immigrants in Southern California who clean houses, mow lawns and wash dishes, making money at the margins and paying few if any taxes. Her story mirrors the contradictions that make illegal immigration such a flash point. She broke the law getting here and drains a municipal resource staying here. Yet she works hard, very hard, so her children won't have to do the same.

Every weekday, she wakes at 2:30 a.m., knowing that even an hour more of sleep means less money. She walks miles and miles, even when it rains, even when she is battling the flu.

"If I miss one day, I'm short," she says.

Her only company is the Spanish-language DJ El Piolin, Eddie Sotelo on KSCA-FM (101.9), who entertains her through a hand-held radio one of her sons gave her two years ago.

Her shoulders and legs ache from pushing the heavy cart up and down hills. Her hands throb from arthritis. This morning, two of her fingers are bandaged with white tape. Two years ago, she had to go to the emergency room to get stitches when a broken bottle gouged open her forearm. She left with several stitches and a tetanus shot. Emergency Medi-Cal covered the treatment.

"I don't know how much longer I will be able to do this," she says. Yet she doesn't know what else she would do. So she continues.

Often, homeowners yell at her: Get out of here! Don't go through my trash!

Rivas never challenges them. She puts her head down and says in broken English, "I sorry. I sorry." And she moves on. She knows what could happen if she doesn't. The homeowners will call police, and she'll end up with a ticket.

About three months ago, a police officer stopped her as she pushed her cart near her house. He told her the cans belonged to the city and that she was violating a city ordinance. But instead of issuing her a ticket, he simply advised her to go in a different direction.

Pasadena police and public works officials said stopping scavengers isn't a top priority, in part because the materials do end up being recycled. But Gerald Weber, supervisor for street maintenance, said the city loses money every time a scavenger takes a bottle from someone's trash can. Weber estimated collectors siphon about 5% from the city's annual recycling profit of about $400,000.

"Technically, they are stealing," he said. "Once it gets to the curb, it becomes the property of the city."

Rivas says the police should harass the drug dealers and prostitutes instead of her.

"We are working honorably," she said. "We aren't robbing. The police should let us work."

Rivas grew up in Durango, Mexico, and crossed illegally into the United States in 1982 with her two oldest children. She met her husband, Luis Angel, and the couple had two more children.

After years cleaning houses, Rivas started collecting cans in 1995. She had temporarily separated from her husband and needed to earn more money. At first, she felt embarrassed going through trash cans. But now, she says she likes being her own boss.

Many of the residents on her routes know her. They greet her as they leave for work. Once, at Christmas time, a woman gave her $20. Sometimes, they hand her bags of their own recycling.

When she finishes her day, at about 11 a.m., she cleans her house and does laundry. To relax, she watches Spanish-language movies on a small television in the kitchen. But she rarely sleeps during the day, except on the weekends. That's when she recuperates and prepares for the next week.

On a recent Saturday afternoon, she cooked carne with pico de gallo for her children as they prepared to go out with friends. Music blasted from her youngest son's bedroom. An ice cream truck drove by. Her dogs wandered in and out of the house.

As she cut up vegetables, Rivas pointed out things she found while working and carried home in her shopping cart -- planters, candle holders, wicker baskets, a gate for the dogs.

Rivas said she wants her children, ages 16 to 25, to have careers. Rivas' children said they appreciate the sacrifices their mom has made for them. Her oldest sons, a landscaper and a loan originator, contribute what they can to the rent for their four-bedroom house. And Angel, who has a green card, earns about $300 a week working in a Food 4 Less warehouse. But the family couldn't survive without Rivas' income.

Living in another part of the county would be cheaper, but Rivas said she and her children prefer Pasadena because it's safe and quiet.

Angel still worries, however, about his wife being on the streets in the middle of the night.

"It's dangerous," he said. "I would prefer if she had a stable job."

Aura Angel, 18, fears for her mom too. When Rivas leaves in the morning, Aura tells her, "God bless you, Mom. Be careful."

Aura said she sometimes has to defend her mom to her friends when they ask why she goes through people's trash.

"I tell them it's just like any other job," she said.

Jose Rivas, 20, said he respects what his mom does now but that he hasn't always felt that away. About five years ago, a friend was driving him to school when they passed his mom, with her cart. Jose put his head down and didn't acknowledge her. He still feels bad.

A few years later, he tried doing the job himself but lasted only one day.

"It was really hard," he said, as he ironed a shirt on the kitchen table. "It seemed impossible to fill up the cart."

Jose Rivas said he wished he could earn more money and help out more with the rent so his mom wouldn't have to work so hard.

"Imagine if I could buy my mom a house," he said. "She could shop, watch telenovelas. That's just, like, one of my dreams."

Each week, Rivas follows her set routes: the streets near the Rose Bowl one day, north toward Altadena the next, and so on around the city. Without a license or a car, she walks everywhere. She doesn't know how many miles she walks, but she is on her feet some days for seven hours.

This morning, she traverses the streets close to her house. Because she hasn't found many cans and bottles yet, she worries that someone else might have beaten her to the neighborhood.

The others are her competitors, but also her compañeros. They call her supermujer -- superwoman.

"They say I walk fast, I fly," she says.

Soon after she leaves the house, Rivas' luck starts to change, as she finds Bud Lite bottles, Fanta Strawberry cans, ketchup and Canola oil bottles, peanut butter jars. Sometimes, she puts the flashlight in her mouth so she can use both hands to search. Other times, she bends over into the trash can, nearly lifting her feet off the ground.

When she accidentally knocks a "student of the month" certificate and a newspaper onto the ground, she picks them up and puts them back inside, neatly arranging the lid.

"If you mess up the trash, leave it thrown on the ground, people get mad," she says.

At one home, a handwritten paper taped to the top of a blue recycling container reads, "Trash." Rivas looks inside anyway.

By 6:30 a.m., Rivas has completed her route. Her cart is full and several plastic bags hang over the side, but she didn't collect as much as she had hoped.

She walks back home, a bit slower now, and parks her cart on the side of her house. The full cart -- a large, sturdy grocery store rig Rivas says she found on the street -- smells of stale beer, sour milk and rotten food. Rivas doesn't notice. She steps inside, sheds her sweat shirt and jacket and drinks a cup of instant coffee.

Across the street, Ana Gonzalez said she respects what her neighbor does to earn a living, especially because rents in the neighborhood have gotten so expensive.

Some mornings when Gonzalez can't sleep, she looks out the window and sees Rivas leaving her house at 3 a.m. with the cart.

"I don't know where she goes," she said. "But some days, she doesn't come back until midday."

One day, she ran into her in the grocery store and Rivas had bags of bread, juice, milk and beans. Gonzalez said she was surprised by how much Rivas was able to buy with her daily earnings.

Just a few hours later, Rivas is out the door again, this time on her way to the recycling center. Opening time is 10 a.m. and she doesn't want to be last in line.

When she arrives, Rivas says hello to several people, including a man who recycles to supplement his Social Security income and a woman who began recycling after her eyesight weakened and she lost her factory job.

"Where is your cart?" a man asks in Spanish.

"Over there," Rivas responds, pointing behind her.

"Why so little?" he says.

"You didn't leave any for me!" she teases.

At the center, a posted sign tells how much the recyclables are worth. Aluminum cans are the most valuable ($1.56 per pound), glass bottles the least (11 cents per pound). She can estimate what she will earn by the number of bags and the height of her pile.

If she has had a good day, she heads across the parking lot to buy flashlight batteries, new gloves, milk, beans or tortillas. On really good days, she buys meat or even a small present for one of her children. Recently she took home a football for her youngest son.

Today, however, isn't one of those days. She dumps her cans and bottles into oversized blue trash containers, pausing to dump out ketchup and soda. Clink. Clink. Clink. Clink.

When she reaches the front of the line, the employee weighs the containers and tallies up the total. He hands her a receipt and $50.30.

"Poquito," she says, shaking her head.

Rivas takes comfort in knowing there is another full cart at home. She had gone out the night before, from 6 to 11 p.m., in a different neighborhood.

She will make another trip back to the recycling center later that day, hoping for a higher tally.

For now, she takes her money and stuffs it in her pocket. Then she grabs her things, says goodbye to the others and pushes her empty cart toward home.

[Tombstone Realty]

I want Ben to give me some money. Not $200 billion or anything, but a cool million would really hit the spot.

Why, I could buy my own pair of gold-plated pompoms.

This is just the high you get from a heroin injection. By next week, we'll be right back where we were (with the traders huddling in corners, arm veins tapped and ready to go for the next injection).

[Inland Empire]

hope they are right but considering that every furniture store in the IE has a going out of business sale on the window I'm not very hopeful.

Every furniture store in the IE? I think you are confused. Two big ones, Wickes and Levitz are going out but Levitz is going out everywhere due to bankruptcy. Wickes may or may not be the same case. Toms Farms and Ethan Allen in SB went out recently. The Toms Farms in Corona is still there. There is still the giant Ashley store in Colton and quite a few others like Living Spaces.(which just added a 3rd store to So Cal) Perhaps if Levitz sold anything other than crap maybe they would still be in business. Living Spaces and Ashley suit the areas life style better than places like Ethan Allen with the stuffy east coast style.

[Inland Empire]

Off topic somewhat but the LAT doesn't have the guts or the brains to provide blog on illegal aliens effect on all of us.

How is this related to real estate?

The woman featured below admits to stealing between $20,000 and $25,000 tax free AND thus so is able to afford $2,300/month rent payment.

Doesn't that scenario artificially inflate real estate values.

Yes by virtue of supply and demand in the housing area. Did I miss something or did the article fail to mention that most cities have a ban on collecting recyclables from the trash cans?
But if you are willing to ignore the laws governing immigration, you have no problem with income taxes or rooting thru forbidden trash cans.
And I am sure your post and mine will get more people whining that we are "racists" for mentioning these things and not ignoring them.

[Laura]

"The woman featured below admits to stealing between $20,000 and $25,000 tax free AND thus so is able to afford $2,300/month rent payment."

What I've always wondered is, if you're going to immigrate to the U.S. and expect to make just enough to survive, why not go to a place with a low COL and not, say, the second most expensive city in the richest country in the world?

I get that there's probably family, a large immigrant population and more social resources in L.A., but if survival is your endgame, why not bite the bullet and go somewhere else?

When my mom and I immigrated to the U.S. (yes, legally) we had reason to stay in L.A. - legal work was available to my mom, an existing safety net of family provided us with shelter in a safe neighborhood and good schools. We were blessed - I don't know how these people can do it and live in unsafe neighborhoods (or good and costly ones), be scared of deportation, have bad schools, etc. on top of that.

[enlightenment]

JPMorgan's Dimon says U.S. likely in recession
Wed Mar 12, 2008 9:14pm EDT
By Joanne Morrison

WASHINGTON (Reuters) - The U.S. is likely in recession already and the housing market is expected to deteriorate further, JPMorgan Chairman and Chief Executive Jamie Dimon told a group of economists here on Wednesday.

"I kind of think we are in one," the head of the nation's third-largest financial institution told the Economic Club of Washington when speaking of the likelihood of a recession. "Financial conditions are getting more extreme," he said citing estimates that housing market could tumble as much as 10 to 25 percent more.

"That would be so unprecedented and it would be really hard to predict the impact," he said, calling steps the Federal Reserve has taken some good steps to help cushion financial markets.

"I think they have been pretty thoughtful," he said of the Fed, adding that more government action may be needed but not in the form of a bailout.

Even so, Dimon predicted that much of the problems in the financial market, particularly the bulk of the needed de-leveraging of these problem loans- is already accomplished.

"The financial side will work through a lot of this...by the end of this year," Dimon said, adding that the rating agencies are not to blame for helping bring on the growing credit crunch.

"Supply and demand will meet. My guess it its about 50 percent done," he said. As for foreign investment in U.S. companies through sovereign wealth funds, Dimon told reporters that such investment should be welcomed. "I think that they should be allowed to invest," he said, but he noted that how much control they should have in U.S. firms is something to be considered.

As for the declining value of the dollar, Dimon cautioned that a growing trade and budget deficit are the cause.

"When you have a trade deficit and a budget deficit like we have, you are going to have a weaker currency," he said, but he asserted that open trade is essential for the U.S.

http://www.reuters.com/articlePrint?articleId=
USN1220862920080313

[David West]

I must say it's not looking good in Westwood for businesses. The greedy jurisdiction takes advantage of the limited parking in the area by removing even more parking spaces making it near to impossible to work or visit the area. Just in the last months construction on Tiverton & Weyburn included extending the red no parking into ridiculous lengths removing two viable spots. The meter pole still remains just fresh with red paint included to force more revenue into parking violations for the people who must come into the area.

When Olive Garden a ten year resident at UCLA and part of a major corporation at 936 Westwood Blvd. sets precedence by suddenly pulling it's restaurant out of the busy area Saturday morning March 14th and closing it's doors in sudden fashion due to outrageous parking fees ($8 with validation) and ridiculous lease increases you can see the influence the area is having on business. When Monday morning comes and loyal UCLA workers come for their 15% UCLA discount at the busy restaurant and find it NOT there; they will wonder what happened! It is simply, the area blanketed in greed has outmatched the profit share of running a business in the area. Employees can't afford to pay $8 a day to park on their income. So, when you start to see good places leave the area, don't blame them. It is results of rigorous parking gouging in the area and relentless rent increases.

Should other businesses start to follow? Who knows? Chilli's less than a block away is surely to notice OG being closed and take a vested interests in the corporate decision to close the doors on a busy restaurant. To get an Olive Garden experience you'll have to trek down to Manhattan Beach or head into the valley. What's worse, we have in the range of 50-100 unemployed students, local residents and other workforce members who can't trek the many miles to transfer to another restaurant. So you tell me if the economy is affecting UCLA?