Joy JuedesChapman University President Emeritus Jim Doti began the 46th Economic Forecast with a good-natured explanation of why the recession he forecasted for this year didn’t happen.
“I know why most of you are here,” he said on Dec. 14 at the Musco Center for the Arts. “You’re here to see me squirm and somehow get out of our forecast, which was pretty telling.
“We didn’t mince words — we said there was going to be a recession right now, late this year … There’s no recession. What happened?”
Doti had forecasted that from 2022 to 2023, the country’s real GDP would drop .4%. Instead, it increased by 2.4%, or $523 billion.
“What explains it? How do we get out of this one?” Doti said.
The reason for the past year’s growth was a $2 billion federal deficit and a short-term fiscal stimulus funded by the government selling bonds to the public and the Federal Reserve. Selling bonds “tightens the money supply to fight the fight against inflation,” Doti said.
He forecasted negative real GDP growth in early 2024 followed by 1.2% growth.
“It would not be a recession but a very weak economy,” Doti said, adding that “we’re not out of the woods and I’m not ready to bet on a soft landing just yet because of the fiscal stimulus we are getting.”
Doti’s co-presenter Raymond Sfeir, director of Chapman’s A. Gary Anderson Center for Economic Research, said the government can lower the deficit by increasing taxes and decreasing spending. Co-presenter Fadel Lawandy, director of Chapman’s C. Larry Hoag Center for Real Estate and Finance and Janes Financial Center, forecasted a good year in the stock market due to interest rates and the stability of large companies like Amazon and Apple.
Lawandy used data from Newport Beach real estate company Green Street to show a slowdown in industrial real estate growth and a slight increase in office real estate growth.
Following Lawandy, Doti forecasted a continued drop in home sales in 2024. He noted a historic trend in the last six months — a median home price increase during rising mortgage rates.
“That’s never happened before because something else that has never happened before is going on, and that is people don’t want to sell their homes when they’re sitting on a sweetheart mortgage rate of 3% or less,” he said.
Doti forecasted a drop in Orange County residential building permits in 2024, from 115,000 to 102,000. Because the county’s population has also dropped, “we don’t have to have new homes to deal with the demand for housing,” he said.
The forecasted job growth for 2024 offers some good news for Californians.
“We are finally over the pre-recession high … it took awhile but we’re there with 50,000 more jobs than in 2019,” said Doti, adding that the growth is in professional, business, education and health fields.
Orange County is also the No. 1 area in the nation for medical supplies and equipment jobs, he said.
Doti ended the forecast with a preview of the 2024 presidential election. The model he and Professor Tom Campbell use considers inflation and job growth to forecast the popular vote.
Following a drumroll by a music student, Doti said that the Democratic Party will win by 7.7%.
“Those of you who are Biden supporters, Democratic supporters, I’ve given you some good cheer at the end of a gloomy forecast,” Doti said, adding the caveat that the forecast will be revised closer to the election.
If there is a recession with attendant inflation and lower job growth, “then the tables are turned and it leads to a loss for the incumbent party of minus 2.8%,” he said.
Before the forecast, Doti was surprised with the announcement that he will hold the new Rick Muth Family Chair in Economics.
