The worst recession in decades continues its stranglehold on the Coachella Valley, The Desert Sun's latest quarterly Economic Index shows.

“It seems like we have reached a bottom,” Chapman University economist Esmael Adibi said in his comparison of data for third quarter 2008 over the same period the year before. The university's A. Gary Anderson Center for Economic Research compiles the quarterly index.

“We're treading water,” Adibi said. “Nothing has been happening.”

But Adibi believes economic recovery is within sight.

“I'm calling for the recession to be over by the middle of next year,” Adibi said, pinning the forecast on President-elect Barack Obama's 2009 stimulus plan that could follow his Jan. 20 inauguration.

The stimulus could be larger than the $700 billion Troubled Asset Relief Program (TARP) the Bush administration deployed.

Anil Deolalikar, a professor of economics and director of Public Policy Initiative at University of California at Riverside, said the situation is dire.

“This is one of the deepest, and probably one of the most lingering, recessions we will face in many, many decades,” he said. “It may go down in history as one of the worst economic periods since the Great Depression.”

Lee Morcus, who co-chairs the Coachella Valley Economic Partnership, used one simple sentence to describe the situation.

“It is bleak,” Morcus said, even as the entrepreneur saw well over 1,000 people — many from the unemployment lines — file applications for 200 jobs at the new Jackalope Ranch restaurant the Kaiser Restaurant Group plans to open in Indio.

“I expect 2009 will be worse than 2008,” Morcus said. “I'm still skeptical about 2010.”

Weeks ago, Adibi predicted conditions would worsen in 2009.

Consumers recoiled and spending stopped, even as gas prices tanked to near five-year lows.

Unemployment soared into the double-digits in three valley cities, and stayed there. Inventory mounted on foreclosed homes, subdivisions and commercial property.

Home construction hit a trough. Stock prices saw their worst roller-coaster ride since the 1930s, forcing retirees and the well-heeled to watch the value of their 401(k) portfolios drop as much as 50 percent.

A major grocery store — Albertsons — dimmed its nighttime lights in Palm Desert to conserve costs. The Classic Club golf course shifted operations last week to the Berger Foundation because of the slowing economy.

Adibi, who predicted the Index would drop from 89.8 in the second-quarter of 2008 down to 85.5 in the third-quarter, said the economy will hold to that level through the rest of the year.

Stimulating a return

The Economic Index is tied to job growth. When it is above 100, it means jobs are being created and the economy is robust. When it heads below 100, it heralds job losses.

The message from 2008 is all the components that constitute the Index are still decreasing.

Given the stimulus package, Adibi expects the Index will begin to shake the doldrums by mid-year 2009 because it isn't likely to take the form of a rebate check.

The plan to create or save 2.5 million jobs by 2011 is multi-faceted:

• Tax cuts for middle-class and low-income people.
• Billions for a public works program to rebuild infrastructure.
• Attention to business sectors that focus on green jobs and energy technology.
• Loans to California and other states facing budget shortfalls.

“Right now there is a lot of pessimism that this will be like a Depression,” Adibi said, but there are so many steps the Federal Reserve and FDIC is taking that there is room for optimism.

“It won't be a typical recovery that you zoom out of,” Adibi said. “Though the GDP will turn positive, we still will deal with high unemployment rates and a consumer that is very fragile, along with a credit market that is at the onset of recovery.”

The Economic Index, which focuses on construction, home prices and tourism, is down 33 percent from last year for the same period, Adibi said, signaling a sizeable downturn in consumer and construction spending.

Yet, tourism held its own and a few multimillion-dollar construction projects moved forward.

• Palm Springs Riviera Resort reopened after a roughly $70 million renovation.
• Framing for The Vineyards, a $55 million apartment complex, came into view in Palm Desert.
• Steel girders popped out of the ground for the Eisenhower Argyros Health Center in La Quinta.
• WinCo Foods made its debut in Indio where the rooftops of homes built in boom times are plentiful and commercial development has remained strong.
• Westfield Palm Desert aced its first vote to expand the mall for the opening of Nordstrom in 2011.

Scott Kelly, owner of a specialty eyewear shop Tonalita, called that news welcome relief.

“It will bring consumers and shoppers back to the mall,” he said.

“Whatever was in the pipeline will finish off,” said Fred Bell, executive officer of the Building Industry Association, Desert Chapter, but new construction could be nonexistent for 18 to 24 months without significant stimulus or government intervention.

Adibi said he believes the worst is still to come for construction.

The Construction Industry Board has reported that 748 permits have been pulled through October, Bell said. The number pales when stacked against the 7,000 permits that used to be issued when valleywide construction was at its peak.

“We have probably lost 15,000 to 19,000 jobs in the construction sector in Riverside County,” Bell said. “That doesn't count the service sector jobs, so we've seen quite a bit of impact on the job base.”

Green relief?

With housing prices and construction spending at a low, Deolalikar said, the valley will benefit from Obama's stimulus package in more ways than mortgage and refinance relief.

“It may be a good opportunity to undertake long-term investments in energy, sustainability, environmental protection,” he said.

He envisions a “green jobs” program and a new public works program to rebuild bridges and roads, boost mass transit and develop wind and solar energy technologies to free the nation from its dependence on oil.

“In the words of (Obama's) economic advisers, a crisis is too good an opportunity to waste,” he said.

Richard Oliphant, a longtime Coachella Valley developer who postponed construction on the billion-dollar Avanterra mixed-use project with LEED-certified components next to the Classic Club, said he remains optimistic.

“The Coachella Valley population is only at 425,000,” he said. “At build-out, it will hold over 1.25 million, so we're only one-third built-out.”

Oliphant voiced confidence the nation's top economists will get it right.

“Otherwise we're making a horrible mistake throwing $1 trillion at the problem,” he said. “If it doesn't make it right, I don't know how we can.”

Bell said the region needs to be prepared to take advantage of the stimulus plan when it arrives.

“It's going to take a different mind-set,” he said. “These plans can make a difference. We need to think regionally.”

Additional Facts

What is The Desert Sun Economic Index?

The Economic Index, prepared by Chapman University's A. Gary Anderson Center for Economic Research, is tied to job growth.

When it is above 100, jobs are being created. When it drops below that threshold, it flags job losses.

Underlying indicators point to a drag in construction spending, a steep decline in home values and consumers pinched to a point they cut back on leisure spending and travel.

During the third quarter:

• Construction spending fell 37 percent.
• Median home prices sank nearly 34 percent.
• Hotel occupancy was nearly flat at 0.4 percent.
• Airline passenger levels fell 2.7 percent.