Anderson forecasts economic slowdown

Policy discussions about the economic future of Los Angeles took center stage at the UCLA Anderson Forecast’s quarterly forecast of the year, with area business and political leaders addressing the challenges they expect the city to face in upcoming years.

Experts including L.A. Mayor Antonio Villaraigosa and UCLA economists convened on campus Monday morning for a conference with the theme, “Solutions for the City.”

Economists from the Anderson Forecast opened the conference with their fourth report of the year. As they have in recent forecasts, economists predicted a slowdown in California’s economy, but no recession.

Edward Leamer, Director of the Anderson Forecast, said the housing market would likely continue to lag, but because the manufacturing sector is not expected to lose a significant number of jobs, the economy would not go into a full recession.

Forecast economist Ryan Ratcliff spoke specifically about the California economy, predicting that real estate would drag down the state’s economy through 2007 and into early 2008, a bit later than previous forecasts had predicted.

“It looks like we were only just seeing the beginning of it,” he said. “We’re shifting our forecast ahead in time a little bit.”

Ratcliff added that it would be more difficult for people to get loans to buy a house, and that this so-called “credit crunch” would keep home sales down for the next few quarters.

But much of the rest of the conference focused on the economic future of Los Angeles.

Forecast economist Jerry Nickelsburg set the stage for panel discussions by describing current economic conditions in the city, highlighting the unequal distribution of wealth among Angelenos.

“Inequality in Los Angeles is uniformly greater than in the U.S.,” he said, explaining that the reason behind this inequality is that the city attracts very wealthy people as well as immigrants, who are typically at the lower end of the income scale.

While the income polarization is well-represented in Los Angeles, the middle class has been “hollowed out,” Nickelsburg said.

He added that middle-class jobs require specific skill sets, which, in turn, require better education.

“Opportunities for the next generation really require innovative education thinking,” he said.

Panel discussions also focused heavily on education, specifically the Los Angeles Unified School District. Many panelists emphasized the importance of K-12 education in securing the city’s economic future.

“Where L.A. is unique is that we have a young population, and I think the question on the table is what we’re going to do with that population,” said Elise Buik, president and CEO of United Way of Greater Los Angeles. “There’s no silver bullet with education. It’s a multi-layered approach that’s going to move things forward.”

William Ouchi, a professor at the UCLA Anderson School of Management and a conference panelist, suggested that K-12 schools should be autonomous in that they should decide how to allocate money, and that parents should be able to choose which school their child will attend.

He said giving parents that choice creates competition among schools, and ultimately increases the quality of all of them.

In giving schools the power of allocating money as they see fit, “what we’re finding is that they’ll end up with … intelligent solutions,” Ouchi said.

Ouchi criticized the current student-to-teacher ratio in LAUSD classrooms and said he believed if schools were autonomous, they would choose to hire more teachers.

But Michael Mehula, chief facilities executive for LAUSD, said the district has already begun making important improvements, citing $19 billion worth of construction currently underway as one example. Once that construction is complete, he said all students will have a school in their neighborhoods, and busing will be unnecessary.

But speakers agreed that there is still room for improvement, and Villaraigosa said he hopes to change what he called the “paradigm of failure in schools.”

“(My family has) been able to achieve success because we can read and write,” Villaraigosa said, adding that he hopes to work with the LAUSD Board of Education to effect changes in the quality of education in the district.

He also said he would like to see greater federal investment in education, including higher education.

“If we want to build the middle class, we have to understand that it’s about … investing in our institutes of higher learning,” he said.

Other topics that panelists addressed included public transportation and the ports of Los Angeles.

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