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Recession hits home (Posted Date :Tuesday, April 15, 2008) |
It is predicted that the downturn will continue for about two more years
The Inland Empire is well into a recession that is predicted to be longer and more severe than what the nation feels as a whole, according to local economists.
“Without question, the Inland Empire is in a recession,” said John Husing, a Southern California economist.
Husing is calling the current situation the worst economy he has seen in his 44 years studying the area.
“There has never been a year where we have lost jobs,” he said.
The average recession since World War II has lasted 11 months, Husing said. He is predicting this recession, at least locally, will be closer to two years.
However, he said that next year will look like 2007, showing very weak growth but not the negative numbers of 2008.
After adding more than 30,000 jobs each year for the past decade, the Inland Empire gained just 593 jobs last year.
Since the first of the year, Riverside and San Bernardino counties have lost nearly 13,000 jobs. That number is expected to jump to 17,900 by the end of the year, Husing said.
The reason the Inland Empire has been hit so hard, according to Husing, is because the largest downturns are traditionally the area’s strengths: housing, population growth and handling of imports and international trade.
“All three are suffering.”
He attributes the collapse of the housing market largely to too many speculative buyers who bought homes for investments, inflated prices and then walked away. Since much of the problem is coming from the mortgage industry, Husing said we need federal action to pull us out of the local recession.
The current economic situation is also a “perfect storm” for a national recession, said Manfred Keil, with the Rose Institute of State and Local Government at Claremont McKenna College and chair of the school’s economics department.
In order for there to be a recession, the Gross Domestic Product must be negative for two consecutive quarters. Husing said he has a strong feeling the first quarter, which just ended, will show negative numbers and that the next will as well.
The National Bureau of Economic Research will then have to declare the recession for it to be official, Keil said. This group hasn’t met yet, and so no decision has been issued.
But both Husing and Keil said they feel certain the group will determine that the United States is in a recession, and will likely predate it back to December or January.
According to a poll on www. VVDailyPress.com, 78 percent of readers agree that the United States is in a recession.
Jose Palafox, an investment adviser with StarFox Financial Services, agrees. However, he would predate it back to late last summer. He said the stock market has been down since last July.
Palafox believes we are towards the tail end of the recession, predicting that the stock market will recover by the end of this year.
However, he said the real estate market takes a lot longer to play out. He is telling his clients that if they want to buy a house to live in and hang on to for a while, now is the time. But as an investment, he advises them to wait.
The housing market will start to pick up as interest rates are lowered dramatically, as they were in January, Palafox said. He said it takes about six months to hit the economy, and that the drop should start to take effect in June or July.
This will be about the same time that most taxpayers are receiving their rebate checks from the federal government’s economic stimulus package, which will also help the situation.
“Going forward,” Palafox said, “we are heading in the right direction.”
By BROOKE EDWARDS Staff Writer
By : Daily Press |
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