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To economists, Indiana and the rest of the country will continue to emerge from recession in 2010. But most of us can be forgiven if we don’t feel that way.
Economic output will grow, but unemployment and consumer worries will stay high through the year.
That was the consensus the IU Business Outlook offered Wednesday at Indiana University-Purdue University Fort Wayne. About 100 people attended. The four-person panel used data generated by Indiana University’s Center for Econometric Model Research to make its predictions.
After the longest recession since the 1930s, the national economy started growing again in July, said Ellie Mafi-Kreft, clinical assistant professor of business economics at IU Bloomington.
“It’s pretty safe for us to tell you the recovery has started in the U.S. and throughout the rest of the world,” Mafi-Kreft said.
She predicted that the gross domestic product – the total market value of goods and services produced domestically in a year – will grow 3 percent in 2010.
And after shrinking in 2008 and 2009, Indiana’s GDP will grow 2 percent in 2010, said Carol Rogers, deputy director of the Indiana Business Research Center at Indiana University Purdue University Indianapolis.
Despite the growth, Indiana unemployment will stay between 9 percent and 10 percent and U.S. unemployment will stay at 10 percent through 2010, the economists predicted.
Consumer spending accounts for 70 percent of gross domestic product. But consumer balance sheets have been “shattered,” Mafi-Kreft said.
They’ve come out of the recession with houses and 401(k) accounts that are worth less, debt that’s still high and credit that’s harder to get. Add to that insecurity about jobs and you have a limping economy.
“Consumers don’t spend, banks don’t lend, and private demand is paralyzed,” is how Mafi-Kreft described it.
Consumer unease is especially bad news for the regional economy, said John Stafford, director of the Community Research Institute at IPFW.
“We depend on the American consumer for the purchase of the durable goods we make in northeast Indiana,” Stafford said, predicting that regional unemployment will run between 10 percent and 11.5 percent through 2010.
Stafford stressed that the recovery is fragile. “Any number of events can send us backward instead of forward,” Stafford said.
However, the panel said a weakening dollar would stimulate manufacturing by making U.S. goods cheaper overseas. That’s potentially good news for the region, Stafford said.
And there’s good news on the business front. U.S. corporate earnings for 2009 are expected to be three times what they were in 2008 and to grow from here, said Robert Neal, associate professor of finance at IUPUI. Neal advised investors to diversify their portfolios beyond U.S. borders, reduce the amount of stock they hold and buy bonds with short maturity dates.
