Economist: U.S. recession to hit Riverside County

By: CHRIS BAGLEY - Staff Writer
Personal income expected to continue climbing | Tuesday, January 29, 2008 10:23 PM PST ∞

RIVERSIDE -- Residents, employees and business owners in this region will feel the bite of a national recession for the next five months, an economist forecast Tuesday.

The prediction comes after a boom period from 2001 to 2006 in which relatively affordable housing in Riverside and San Bernardino counties powered construction and a range of other industries, according to the report by Esmael Adibi, director of Chapman University's A. Gary Anderson's Center for Economic Research.

Economists have said recently that the housing sector, including skyrocketing foreclosure rates, has since become a drag on the region's economy.

Late last year, Adibi forecast a mild recession for the United States in the first half of 2008. Speaking to civic and business leaders at the Riverside Convention Center on Tuesday, Adibi detailed its likely effects on the home-heavy region that stretches from Aguanga to Apple Valley.

The economy will probably create 19,000 jobs in the two-county area this year, just more than half of the 36,000 created last year and roughly a quarter of the 75,000 created in 2004, according to the forecast.

That's also far below the average of 58,000 adults joining the labor force each year, and the discrepancy could help push up the region's unemployment rate, already at 6.6 percent, according to an estimate by the California Employment Development Department.

Shrinking home equity and consumers' pessimism probably will keep retail sales to a growth of about 3.4 percent, an increase that would result almost entirely from inflation in the prices of goods, Adibi forecast.

And home prices in the region's middle-class neighborhoods probably will deflate by an additional 12.5 percent after falling an average of 5.4 percent in 2007, according to the forecast.

Average prices in Southwest Riverside County fell by about 20 percent last year, according to The Californian's analysis of sales records from Realist and the Multi-Regional Multiple Listing Service, two databases used by local real estate agents.

The lone bright spot in Adibi's forecast was a continuing increase in salaries and other personal income. Salaries have been rising steadily in the two quickly developing counties since 2000, mostly outpacing neighboring counties and the rate of inflation, according to state and federal government reports. Adibi forecasts income growth of 4.6 percent, nearly 2 percentage points above his prediction of 2.8 percent inflation.

Adibi said he expects the national economy to emerge from the recession, defined by two straight quarters of shrinking gross domestic product, in the second half of the year. His forecast didn't specify comparable figures for individual states or areas within them.

Contact staff writer Chris Bagley at (951) 676-4315, Ext. 5444, or cbagley@californian.com.