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While U.S. economic growth is forecast to slow this year, most economists still are predicting a relatively strong economy.

The U.S. economy - as measured by the gross domestic product, the value of all goods and services produced in the nation - grew 5 percent in 1999 and an estimated 3.7 percent last year.

This year, growth estimates are in the range of 2 percent to 3 percent.

But there are some factors - like California’s energy crisis and its possible effect on the nation’s economy - that have begun to concern forecasters and in some circles have raised talk of a U.S. recession.

According to the forecasters themselves, what may appear to be a precise science is a black art, one that is constantly confounded by the changing structure of the economy and the refusal of investors, consumers and business executives to behave as rationally and predictably in real life as they do in economic models.

"The reason we have trouble calling recessions is that all recessions are anomalies," said Joel Prakken, president of Macroeconomic Advisers of St. Louis, one of the nation’s leading forecasting firms.

According to Prakken, every modern recession has been caused by a combination of overly aggressive interest rate increased by the Federal Reserve, which weakens the economy, and some "external shock" that pushes it over the edge.

Because such shocks - the 1973 oil embargo, for example, or the 1990 Iraqi invasion of Kuwait - are random and, by their nature, unpredictable, Prakken argues that it is virtually impossible to predict when a slowing economy would turn into a shrinking one.

For the moment, Prakken, like most other forecasters, is confidently predicting that the economy will skirt the edge of recession early this year and then pick up its pace, growing at an annual rate of 2.6 percent.

But as California wrestles with its economic troubles - the energy crisis, combined with a high-tech shakeout - economists have begun to question whether that state could put more drag on a U.S. economy that is already downshifting.

The energy mess is "one more negative added to the mix," says Tom Lieser, a senior economist with the Anderson Business Forecast at University of California at Los Angeles. He expects California to navigate its way through the immediate crisis but worries about its longer-term impact.

Other states facing economic and financial trouble typically don’t warrant such attention. But not only is California the nation’s largest state in terms of both population and economic heft; the Golden State also seemed to epitomize the New Economy.

Job growth in the state has been double that in the nation as a whole; of the 2.1 million jobs created in the United States during the first 11 months of last year, one of every five new hires was in California. The state produced more than $1.2 trillion in output in 1999, making it the sixth-largest economy in the world, slightly smaller than the economy of Britain and a little bigger than that of Italy.

But soaring energy costs are beginning to take a toll on the Golden State, with low-end manufacturers and the state’s agricultural industry among the first to feel the effects.

With the relatively uncertain outlook, many forecasters are now waiting to see what signals the Federal Reserve Board will give at its next meeting this week.

West Coast outlook good but cautious

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Idaho is hot. Washington is lukewarm. Oregon is dragging when it comes to economic growth. And California is a wild card.

For now, the economic forecast for the region is cautiously optimistic, with the expectation that West Coast states’ economies will slow, but still be good. Overall, employment growth will occur, but below the surprising rates of the past three years.

With its booming computer chip industry, Idaho is expected to be the region’s growth leader in employment, population and personal income, said John W. Mitchell, a U.S. Bankcorp economist. A strong semiconductor industry offsets weaknesses in the agriculture, forest products and food processing industries, he said.

Foreign competition and bumper crops have hurt farmers across the region. And surging energy costs are taking their toll on aluminum makers in Oregon and Washington, as well as manufacturers and shippers throughout the region.

The semiconductor industry is a strength in Oregon, but expected declines in manufacturing will slow economic growth, Mitchell said.

Meanwhile, it is unclear how significantly California’s unfolding energy crisis will slow that state’s economic growth.

On the Web:
Regional forecasts by the Federal Reserve Bank of San Francisco
www.frbsf.org/

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