by Calculated Risk on 12/07/2006 10:29:00 AM

From the LA Times: UCLA analysts back forecast of 'soft landing'

Despite the housing downturn, the California and U.S. economies are headed for a "soft landing" because trouble in one sector alone is not enough to trigger a recession, UCLA economists said in a quarterly forecast to be released today.
...
A national recession is ... unlikely, UCLA Anderson Forecast director Edward Leamer said.

"If you are a builder or a broker, it will feel like a deep depression," he said. "But the rest of us will hardly notice."

Leamer's national forecast devotes 14 pages to explaining why several economic models foresee recession.

Then, in the final page and a half, the forecast says such models are wrong because "they can't seem to be taught that something is very different this time."

In recessions, Leamer said, the manufacturing sector declines, along with construction, and the combined job and productivity losses cause recession.

What's different this time, he said, is that construction is poised for a downturn, but manufacturing is "still on its knees in a deep trough."

Outside manufacturing and construction, job losses in past recessions have been minimal.

And, without a substantial decline in manufacturing jobs, Leamer said, "there cannot be enough job loss to qualify as real recession."

His conclusion: "The models say 'recession'; the mind says 'no way.' I'm going with the mind."