CLA Anderson Forecast’s third quarterly report in 2015 for the United States considers whether or not the economy can withstand an increase in the prime lending rate. It concludes that the answer is yes.
The forecast for the national economy for the next two years is a healthy one, a slim chance of a recession and a slight chance of a surge in growth. In California, the forecast remains largely unchanged since June. Growth in employment in California will continue, albeit it at a slower pace by 2017, as the unemployment rate falls to about 4.8 percent, similar to that of the nation as a whole.
In his forecast for the national economy, UCLA Anderson Forecast director Edward Leamer provides historical perspective regarding the current expansion that is now in its 25th quarter. Leamer points out that the U.S. is in its fourth-longest expansion since 1948. Using history as a guide — and given that the Fed will ultimately start raising interest rates later this year — Leamer says that some might think there is an 80 percent chance of the current expansion ending soon. Not so, says Leamer, because the tepid pace of GDP growth, amounting to a modest, cumulative increase of 13 percent, so far is exceeded by only two of the other post-1948 expansions. As a result, the forecast says there is a 20 percent probability of an imminent recession.
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