Susan Valot
April 24, 2009
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Cal State Fullerton economists have released their midyear economic forecast. They say we haven't hit the bottom of the recession just yet. KPCC's Susan Valot takes a closer look at the report.
Susan Valot: Back in October, Cal State Fullerton economist Anil Puri predicted we'd be starting our climb out of the recession right about now. He thought the economy would keep going downhill for the first three months of the year – and then start to improve during the second quarter. But Puri says now, he thinks the economy won't start to recover until the second half of the year.
Anil Puri: The government's tremendous effort in terms of mortgage support, stimulus package – all of these things are going to help. Also, there's a natural tendency in the economy that there's only so much further down that it can go. There's a natural tendency for the decline to slow down.
Valot: Economist Anil Puri predicts that'll start to come into play later this year. He says one of the big questions is, how many bad loans do the financial institutions have? Puri says it's surprising that we don't know – and he says until we
do know, the economy can't recover.
Puri: And we think that it's the resolution of financial market, institutions' debt and the recovery of the mortgage industry, the housing industry, that are going to lead us out of this recession.
Valot: But like a loaded-down big rig crawling its way up a steep grade, Puri says recovery's gonna take time.
Puri: I'm hopeful. It's a question of
when that will happen. We believe that recovery will begin very slowly in the third quarter, fourth quarter, and will not really reach full, the
normal rate of growth until almost 2011. Even 2010 will be a slow recovery.
Valot: Puri says the problem is you don't know when you've
hit bottom until you're looking in the rear-view mirror. He says there are lots of unknowns, lots of surprises.
Puri: I think the sharp decline, the rate at which the economy has fallen has caught
everybody off guard, and also the depth of this recession. Nobody expected this, such a deep recession from [the] financial situation and mortgage-backed loans to cause such a havoc with the whole economy.
Valot: Anil Puri – the dean of Cal State Fullerton's Mihaylo College of Business and Economics. He says this recession will be the longest since World War II.
But he says there are silver linings. The government's taking a "proactive approach." Oil prices have dropped. And inflation's not a concern anymore. But Puri says it's still going to take a while for the economy to bounce back.
