Despite housing problems and high oil prices, recession unlikely, study asserts

By ALEX VEIGA, Associated Press
Posted Thursday, December 6, 2007Read Comments-->12/06/2007 -->
LOS ANGELES -- The nation's housing doldrums will drag on at least through 2009, dampening U.S. economic growth and job creation, but the slowdown won't push the economy into a recession, according to a new economic report.
Despite plunging housing values, rising oil prices and credit problems that continue to plague Wall Street, the nation's job market is unlikely to suffer the kind of steep losses that would tip the economy into recession, according to the quarterly Anderson Forecast by the University of California, Los Angeles.
"We still think an official recession is not in the immediate future," said Edward Leamer, co-author of the forecast to be released today.
Some economists and financial pundits have warned the nation will sink into recession, with a wave of reset adjustable-rate mortgages tearing through the economy next year.
Leamer, however, insisted the housing woes alone won't hobble the economy enough to cause two consecutive quarters of negative economic growth in the nation's gross domestic product -- the standard used to define a recession.
The U.S. unemployment rate would have to soar from the current 4.6 percent to nearly 6 percent by the end of next year, the equivalent of a loss of at least 2 million jobs, Leamer said.
That would require major job losses from a sector other than construction, which Leamer doesn't see happening.
Heavy job losses in manufacturing, which has shed about 3 million jobs since 2001, could have such an impact, but Leamer says that is implausible.
Still, he projects the economy will remain sluggish before starting to rebound in the second half of 2008.
The forecast estimated the housing slump cost the U.S. economy a percentage point of growth this year.
Leamer predicted U.S. housing prices will continue to drop, and levels of new construction will remain depressed, through 2009.
Even so, the housing drag on the national economy will "substantially abate" by mid-2008, with housing starts bottoming out by next summer to about 900,000 units, Leamer said.