2008 U.S. economy forecast near recession

Los Angeles -- The U.S. economy will hover near recession for at least half of 2008 and could easily fall into it with a major hiccup, a university forecast said Wednesday.

In addition, the U.S. Federal Reserve will not lower interest rates when its Federal Open Market Committee meets Tuesday, the University of California, Los Angeles, Anderson Forecast said.

The forecast predicts the Fed will cut rates in the fourth quarter.

Tightening credit and further home-construction declines will send the economy into a "near-recession," with growth hovering at just above 1 percent through 2008's first three months, said the forecast, titled "Turbulence."

The nation's unemployment rate will rise to 5.2 percent by mid-2008, up from the current 4.6 percent, the forecast said.

Home values will continue to fall by 10 percent to 15 percent, it said.
"This is very touch-and-go," Senior Economist David Shulman said in the report. "When the economy slows to a very low rate of growth, it doesn't take much to tip you into recession."

Shulman said the future of the U.S. economy would lie in the strength of the global economy.

"The global economy is booming," Shulman wrote. "Indeed, it is the strength of the global economy that is powering the stock market to new highs (and) it is no accident that the Wall Street rally is being led by the giant global corporations who are benefiting most from the worldwide expansion."

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Copyright 2007 by United Press International.