A few bright spots are beginning to take shape as the United States economy drags itself out of a recession, a national economist told Durango’s business community on Friday.
The fact that the economy is slowly growing despite a tidal wave of growth-stunting factors is good news, said Elliot Eisenberg, a senior economist with the National Association of Home Builders. With many economic indicators at rock bottom, the only place for the economy to go is up, a lively, bowtie-clad Eisenberg told the audience at the breakfast hosted by the Durango Chamber of Commerce.
“Growth is unsatisfactory, but it isn’t dreadful either,” he said. “Things have gotten better.”
Eisenberg predicted the economy will grow at 2 percent through the rest of the year.
Though he struck a hopeful note, the economist didn’t skip mounds of data that painted a dismal picture of the recession-gripped economy’s path during the last four years.
Usually the magnitude of the recovery is proportionate to the magnitude of the recession that precedes it, but the most recent recession bucks that trend. We’ve experienced a terrible recession and then an anemic recovery, Eisenberg said.
The economy needs to create about 225,000 jobs per month and “we’re not even close,” he said. He is predicting it will take eight years for the economy to recover the number of jobs lost in the recession.
The declines in the unemployment rate that provided some signs of encouragement are primarily a factor of people leaving the labor force, rather than people finding actual jobs, Eisenberg said. Delinquent loans are still at 2009 levels and millions of home mortgages are underwater. (Twenty percent of Colorado’s mortgates are underwater.) Per capita income is flat and every age group except seniors on Social Security saw real income decline from 2007.
On top of Eisenberg’s data, May unemployment numbers released earlier this month contributed to a not-so-rosy picture of the economy. Colorado’s seasonally adjusted unemployment rate increased two tenths of a percent to 8.1 percent compared with April’s rate. More people are entering the labor force, but employment is struggling to catch up, said Alexandra Hall, chief economist for the Colorado Department of Labor and Employment.
During the Great Recession, people in Colorado were dropping out of the labor force at a greater rate than across nation, Hall said.
“Now we have more of those people returning to labor force putting upward pressure on unemployment,” she said.
Durango’s unemployment increased two-tenths of a percentage point from May 2011 to last month, but with such small numbers, the increase is within the realm of statistical error, said Joseph Winter, a senior economist with the Colorado Department of Labor and Employment. Durango’s employment situation is relatively stable, Winter said.
Despite the economy’s lackluster performance, Eisenberg gave 10 reasons why things won’t get (much) worse:
Commodity prices have stopped rising.
Interest rates are staying low for a long time, which means inflation will most likely stay low.
House prices have almost stopped declining.
Consumer sentiment is already at dismal levels.
Europeans can’t get much dumber, and our economy is growing despite Europe’s troubles.
The rich are doing really well.
Bankers can’t lend much less than they are now.
Corporate profits are not expected to decline by much if at all because companies have learned to live in a new environment.
Congress may cut spending now, but it’s doubtful.
Not many more countries can slow down economically, most are already slow.
At the end of his presentation, Eisenberg provided a three-step prescription for the economy: The government needs to enact a major stimulus in the short term, implement austerity measures after the country has gotten back on its feet and then spearhead long-term tax reform.
With the pending expiration of Bush-era tax cuts, the debt ceiling issue, and the end of a 2 percent cut to Social Security payroll tax all coming to a head in January, Congress must do something or else the country will slip into another recession, Eisenberg said.
“The economy needs central life support from central banks and governments,” he said.