US Recession Appears Likely, UCLA Says

LOS ANGELES-The US will almost undoubtedly fall into a recession later this year or in early 2002, a widely anticipated report by UCLA forecasters says, though Southern California’s economy won’t suffer as badly as the nation’s as a whole.

The report was issued by researchers at the university’s Anderson School of Business, which has established a reputation for being among the most accurate forecasting groups in the country. The study also marks the first time a major forecast group has said California’s power crisis will indeed push the entire US into recession.

“We still expect sluggish growth through the rest of the year and two quarters of negative growth commencing no later than (the first quarter) of 2002,” says Edward E. Leamer, the economist who leads the forecasting team. “Although the interest- and tax-rate cuts may help the train move faster, there is no light at the end of the tunnel.”

The soaring cost and uncertain supply of power in California are already causing many firms to delay expansion projects, which has slowed growth here and is having a ripple effect across the US, the UCLA report says. Troubles have been compounded by the problems facing dot-coms and the tens of thousands of jobs those companies have eliminated.

The forecast, which was produced jointly with Cambridge Energy Research Associates, says rising utility bills and sporadic blackouts could trim California’s gross state product by a hefty 1.5%. “It’s a dicey situation with the power crisis,” UCLA senior economist Tom Lieser adds.

Los Angeles and the rest of Southern California will fare better than most other parts of the country, Lieser says, thanks to its more diversified economy and relatively low exposure to the troubled dot-com industry.