October 22, 2007

CSUF Forecast: No Recession

By Dan Beighley
Orange County Business Journal Staff

Modest job growth will buoy the economy from going under, according to a forecast from California State University, Fullerton.

To a crowd or more than 800 at the school's annual forecast event at the Hyatt Regency Irvine, Cal State Fullerton business school dean Anil Puri said he expected slower economic growth in 2008, but could not predict a recession.

"We cannot predict a recession, but do see a slow down," Puri said.

Despite government data that shows stifled job growth, Puri predicted that 2007 will show a 1% increase in jobs, and that 2008 will also show modest growth of 1%.

Data provided by the state's Employment Development Department is subject to revision, according to Puri.

Puri also stated that he had problems with the accuracy of the department's data, and felt unfortunate he had to base his forecasts on it.

Strength in jobs demonstrates a much stronger economy than what was experienced in 2001 before recession, according to Puri.

Housing prices will continue to decline by 5%, he said. The number of home sales will also drop off by about 30% to 50%.

Inflation could be a big risk factor, according to Puri.

But lower economic growth should keep inflation moderate enough for the Federal Reserve to lower interest rates.

Puri predicts the Federal Reserve will lower interest rates to 4% by this time next year. This will be a 75 basis point reduction from where we are now.

Though if there were to be a recession at the national level, Puri believes that the diversification of Orange County should allow it to fair better than most of the country.