Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Chapman forecast: Economic recovery will continue

June 16, 2011 | 10:35 am

Chapman Another day, another economic forecast –- but this one is pretty rosy, so pay attention. A day after UCLA’s Anderson School of Management predicted that the state’s housing market would slow the recovery in the state, economists from Chapman’s A. Gary Anderson Center for Economic Research released a forecast saying that low home prices, coupled with a strengthening job market, could help California's economy.

Payroll employment in the state will grow 1.6% this year, and 2.1% next year, forecasters say, with job strength in professional and business services, education and health services and leisure and hospitality. Gas prices will remain at current rates through next year, which means newly employed consumers will have more spending money. Taxable sales in the state will grow 5.9% this year, and 6.3% next year, they say.

With more money in their pockets, Californians will also be motivated to buy homes as prices continue to fall –- unless tight lending standards make it too tough for them to get loans.

Home prices in California will fall 4.4% this year, and an additional 0.7% next year, according to the Chapman forecast. And though there are a number of underwater and stressed properties in the state, fewer new stressed properties will come onto the market next year.

Housing prices in the nation will continue to drop as well, in part because there are more than 2 million homes in foreclosure in the nation. Forecasters say prices will drop 2.7% this year and a further 1.4% in 2012. But there are positive signs as well. New households should absorb some of the vacant units. Rental vacancies are also falling –- but as prices rise, renters may choose to buy homes instead.

Although people’s homes are worth less, many had gains in the stock market over the past year that made up for those losses. Household net worth declined by $680 billion because of housing prices dipping, but increased by $3 trillion because of stock market gains.

Nationally, as the dollar continues to slip in value, exports will increase. That will lead to gains in the gross domestic product of 2.7% this year and 3.6% next year. Job growth will also stay positive, adding 3.4 million jobs between now and the end of 2012, pushing the unemployment rate to 7.5%.

Forecasters say that although temporary shocks to the economy -- such as the earthquake in Japan and spiking gasoline prices -- may have led to slow growth this quarter, the recovery will still continue, and even accelerate.

"Going into 2012, there are a number of positive fundamentals that point to strengthening economic forces," the forecast concludes.

RELATED:

California to suffer housing shift, UCLA forecasters say

Core prices rise faster in May, causing fears of stagflation

-- Alana Semuels

Photo: Chapman University. Credit: tracie7779 via Flickr

Comments 

Advertisement










Video