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Reply #6: Slower (California) economy forecast for 2006 [View All]

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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jun-21-05 07:27 AM
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6. Slower (California) economy forecast for 2006
http://www.mercurynews.com/mld/mercurynews/11946410.htm

The California economy, which has shown signs of solid growth in the past year, will see much slower growth in 2006 and could even go into recession if the red-hot real estate market cools down, according to the latest economic forecast by the Anderson School at the University of California-Los Angeles.

Economists there, in a quarterly forecast released today, said most growth in the past year has been fueled by the sky-high real estate market in California and in the rest of the United States.

``We've got an economy driven by froth -- that's going to cause big problems,'' Christopher Thornberg, a senior economist of the UCLA Anderson Forecast, said in an interview.

Thornberg, who wrote a report in the forecast called ``The California Report: Beware the Froth,'' has turned more bearish about the real estate market in recent months. ``We have an economy that is acting like we are in the midst of a big boom when we are not,'' he said.

<snip>

One way the real estate boom has helped the economy is by adding jobs. In the period from 2003 to 2005, when California added 159,000 new jobs, the biggest drivers of those jobs were construction, finance, insurance and retail trade. These jobs are mostly real estate-related, from the building of new homes, renovating old homes to the financing and refinancing of home mortgages. Construction jobs grew 37 percent from 2003 to 2005, and finance and insurance jobs grew 36 percent in the same period.

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