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UCLA Economists Say We're In For A 'Depression-Like Crisis'
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Economists at UCLA predict the coronavirus pandemic will plunge the U.S. into a "depression-like crisis," and employment levels in California won't return to normal for years.
According to the UCLA Anderson economic forecast published Wednesday: "For too many workers, the recession will linger on well past the official end date."
While economists had hoped for a V-shaped recovery -- with a steep downturn followed by an equally steep snap back -- the UCLA report envisions a recovery shaped more like the Nike swoosh, with a sharp 42% drop in GDP followed by gradual job growth playing out over years.
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The retail and leisure and hospitality sectors have taken the brunt of layoffs so far. With tourism down and consumers fearful of going back to old habits, many businesses will close for good and others will hobble along with fewer workers.
UCLA economist Jerry Nickelsburg said Californians working in those fields could take the longest to recover.
"Those two sectors are low-income sectors," Nickelsburg said. "So it creates an additional problem in that these are folks that are the least capable of making it through without a great deal of suffering."
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L.A. County's unemployment rate is currently close to 21%. Nickelsburg predicts hiring will start to pick up, with faster job growth in California's tech industry as people rely on new digital tools for work and socializing. But by 2022, California's overall unemployment rate will still be significantly higher than pre-pandemic levels -- 6.8%, according to the forecast.
California home-building is forecast to decline by 17.3% this year. Nickelsburg said there's really no chance of developers building enough housing to ease the state's affordability crisis. However, less migration into California could ease some of the upward pressures on rents and home prices.
A word of caution: UCLA's outlook assumes the pandemic will start to wane this summer, and that new waves of infection won't lead to more lockdowns.
"If that assumption is too optimistic, so is our forecast," said Nickelsburg.
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