California: An economic micro-climate

March 12, 2008 11:36:15 AM PDT
We've been hearing a lot about a possible recession, but a new report from UCLA says we can still avoid a recession, even though housing, jobs, and consumer spending are all off.

UCLA's Anderson Report says the slumping housing market is to blame for eating away at jobs and consumer spending, but as long as the mortgage crisis does not expand, the nation can avoid a recession.

USF management professor Eugene Muscat says the UCLA report would be more positive than others if it relied heavily on data from California.

"If UCLA has a sample that is more heavily California based, we as an economy are better represented in economic sectors that are growing rather than facing layoffs."

Muscat says California is an economic micro-climate, driven by property values that are holding up better than anywhere else.

"The person whose wealth is in their home, property rich and cash poor, is going to use their credit cards. They're going to continue to spend. They're going to continue to have the quality of life consistent with their million dollar home," says Muscat.

According to Golden Gate University consumer psychologist Kit Yarrow, people are also profoundly affected by what they hear about the economy, even without direct experience.

"It's a vicious cycle, so some people get a sense from what they read and hear that the economy is not good and they pull back on their spending ,which makes the economy worse, which then gives us more to report on," says Yarrow.

"I don't know if I'm changing my spending consciously, but I am noticing I'm spending less money than this time a year ago," says Jessica Bonhaus of San Francisco.

"Being self-employed, we see that people are cutting back on the amount of money and time that they want you to work for them," says Gary Uhouse of San Francisco.

One San Francisco grandmother, Joanne Schier, has her own take on how to navigate economic uncertainty.

"Its' very important for them to make good decisions and good choices and not get themselves in a situation where they're spending more than they're making."