The new year comes with a lot of new changes, not all of which are positive for national and state economies, according to Anderson economists and the recent UCLA Anderson Forecast final quarterly report of 2008.
“2009 is going to be a recessive year, with negative GDP in the first two quarters and slow growth after,” said Jerry Nickelsburg, UCLA Anderson Forecast senior economist.
Gross Domestic Product is a measure of economic activity and production of goods and services, Nickelsburg said. When a refraction happens in these numbers, a recession occurs, he added.
The recession occurred in the last quarter of 2008 and will continue into the first half of 2009, with GDP declining about 4 percent. But slow growth will occur in the second half of 2009, when it will reach 3.5 percent, he added.
Nickelsburg said that a major cause of the recession was the reaction of consumers to current events. Consumers were fearful of their future, so they pulled back the amount of spending they do, causing a contraction in our economy.
Specifically looking at California, the state’s economy will be worse than the nation’s in 2009, he said.
The forecast for California calls for a weak first three quarters with some recovery in the last quarter, according to a Forecast statement.
In addition to the national recession, California was harder hit than most states because of major housing issues and the state’s budget deficit, Nickelsburg said.
Lower state employment and lower state spending will cause California to perform worse than the nation in 2009 and throughout 2010, he added.
The unemployment rates are forecast to rise as high as 8.7 percent next year and remain at that level through 2010, according to the Anderson Forecast.
The question of how to fix the economic problems remains.
“We have to find a solution to our state deficit by making better decisions when it comes to our finances,” Nickelsburg said.
As members of the University of California, certain students are likely to be affected by the recession along with the state deficit, Nickelsburg said.
He said for students graduating in the spring of this year, the market for jobs is going to be much more difficult.
“Generally during times like these, students coming out of undergraduate programs apply to graduate schools, internships or volunteer work rather than looking for jobs,” he said.
Financial aid is also going to be an area where changes will be seen.
A large increase in the number of financial aid applications is expected in 2009, said Ronald W. Johnson, director of UCLA financial aid.
“Financial aid is going to become more important to families and we certainly encourage students to apply for it in this application cycle even if they don’t think they need it,” Johnson said.
He also said that fee increases are very likely, though the specifics on the budget have not been worked out yet. But when fees are increased, a portion of it goes to financial aid.
Johnson said the financial aid office is hoping this will help cover any increase in fees seen in 2009.