Economists See Soft Landing in Housing Slump

Los Angeles — A widely anticipated slowdown in the U.S. housing market could take a toll on both jobs and the overall economy, but isn't likely to lead to anything like a recession, especially given the already depleted state of another key sector, manufacturing, according to an economic forecast prepared by the Anderson School of Management at UCLA.

“We expect housing to start slowing the economy in this quarter or the next, but we do not see a national recession being caused by this trouble in housing because of the current downtrodden status of the manufacturing sector,” said a team of UCLA economists.

Prolonged weakness in manufacturing, said the Anderson Report, actually works against the likelihood of a recession, since a recession “is first and foremost a period of job loss and unemployment” — and after years of steady pruning, there isn't much fat left to be trimmed in manufacturing.

“Without significant job loss in manufacturing, we are not likely to have a recession-level elevation of joblessness,” the UCLA economists emphasized. “Also, absent a sharp decline in jobs, the correction in the housing sector is likely to be spread over a larger number of years.”

Underlining the current weakness in manufacturing, and how few jobs there are still at risk there, the UCLA team said, the decline in manufacturing jobs following the 2001 recession “has been extremely great, knocking down jobs by almost three million, from 17 million to 14 million. Recently, we are only bouncing along the bottom with no further losses. There is no dead wood in manufacturing. There are hardly any trees left.”

Not so in housing construction, however, and the job losses there could be severe. “A bursting of the housing bubble could well come with a sharp decline in jobs in construction, likely one-half million jobs, and maybe as many as one million, but phased in over two or three years.”