Although the economy has stalled and will continue its slow growth, the indicators don’t point to a double-dip recession, Mark Schniepp, director of the Santa Barbara-based California Economic Forecast, said during Thursday’s Radius Group Economic Forecast.
“For a recession to occur, the indicators that have been signaling expansion would have to turn quickly, stall out this month or sooner,” Schniepp said.
GDP, the stock market, job growth, retail sales and corporate profits have not shown consistent downturns during the past several months, therefore, another recession is not a foregone conclusion, he said.
A housing market turnaround is the key to the recovery, but it’s currently stalled by minimal job creation, Schniepp said. In Santa Barbara County, there has been virtually no new housing built and no price appreciation, which has shattered confidence in real estate, he added.
Schniepp said he expects job creation to move at a glacial pace, the unemployment rate to stay in double digits until 2014, and little change in the housing market.
But the bright spot in the South County is in the apartment sector, which boasts a 1.63 percent vacancy, according to Radius principal Steve Golis. The county’s population trends show more Generation Y workers and retirees by 2020, and both groups are likely to prefer apartments over long-term investment, he said.
With low rents and low interest rates, there is a lot of opportunity for growth, Schniepp said. Consumer uncertainty has delayed investments, but when things do happen, they will happen fast, he said.
Publicly held federal debt has increased 80 percent since December 2007, which worries Dr. Peter Rupert, director of the UCSB Economic Forecast Project.
“That’s something that should worry all of us,” he said.
Similar to California Lutheran University economist Bill Watkins, who spoke Tuesday night at Montecito Bank &Trust’s Business-to-Business event, Schniepp’s biggest worry stems from the European Union.
The European banking system is hampered by weak credits, other countries are withdrawing its funds and the PIIGS are facing significant debt problems, Schniepp said.
Watkins said he expects at least one country to break away from the European Union by the end of next year.
“Given the weakness in United States and global financial markets, the upcoming financial crisis has the potential to cause another, very painful recession,” he said.