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Though the housing market has entered a state of major cyclical decline nationwide, economists from the UCLA Anderson Forecast concluded in their quarterly prediction that the economy is not entering a recession, but rather a period of slow growth.

But David Shulman, senior economist for the UCLA Anderson Forecast, said there could still be problems in the future.

“While the U.S. economy appears to have seamlessly downshifted to a soft landing, we suspect that there will be turbulence ahead,” he said.

Shulman said challenges the economy could face in the upcoming quarters include increasing inflation, sluggish growth and a rise in unemployment.

In response, the Federal Reserve will cut the federal funds interest rate from 5.25 percent to 4.5 percent by June 2007, Shulman said.

Historically, housing trends have played a significant role in economic recessions, said Edward Leamer, director of the Anderson Forecast.

According to Leamer, eight out of 10 of the country’s housing slumps since World War II have led to economic recessions.

“We look at housing slumps with concern because when housing goes down, it is usually a warning sign that a recession will begin soon,” Leamer said.

But speakers at the Anderson Forecast conference said that the current housing slump may be an exception to this rule.

Though economists predicted that California’s real estate sector will continue in the decline that started earlier this year, they said other sectors will probably not experience similar downturns.

Ryan Ratcliff, an economist with the Anderson Forecast, said the fact that most sectors are expected to remain stable indicates the economy is entering a slowdown rather than a full-blown recession.

Because job loss is expected to be minimal, Anderson Forecast economists predicted that the economic slump will be shallow, but may take at least five years to overcome.

Ratcliff analyzed the current housing slump, comparing the struggle between property owners and prospective buyers to a junior high school dance.

“I picture the buyers and sellers lined up on opposite sides of the room staring longingly at each other, but nobody is dancing,” he said.