Archive for Friday, October 29, 2010

Only slight economic gains foreseen in 2011

October 29, 2010

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— The new Congress that begins in January will confront an economy and a job market that will improve only slightly next year, according to an Associated Press survey of leading economists that found them gloomier than they were three months ago.

Brian Holbrook reads the Employment Guide while attending a Global Recruiting Solutions job fair in Livonia, Mich., in this Sept. 29 photo. Fewer people applied for unemployment benefits last week, the second drop in a row and a hopeful sign the job market could be improving.

Brian Holbrook reads the Employment Guide while attending a Global Recruiting Solutions job fair in Livonia, Mich., in this Sept. 29 photo. Fewer people applied for unemployment benefits last week, the second drop in a row and a hopeful sign the job market could be improving.

Unemployment will dip only a bit from the current 9.6 percent to a still-high 9 percent at the end of 2011, in their view. In fact, some economists now think unemployment won’t drop to a historically normal 5.5 percent to 6 percent until at least 2018 — several years later than previously envisioned.

The latest quarterly AP survey shows economists are pushing back their estimates of when key barometers of health — hiring, spending, economic growth — will signal strength.

“When you look to 2011, the words to describe the economy are glum, lousy, subpar,” said Rajeev Dhawan, director of Georgia State University’s Economic Forecasting Center.

In the previous survey in July, the economists had predicted unemployment of 8.7 percent at the end of next year. In the survey before that, they foresaw 8.4 percent.

Voter frustration over unemployment is threatening to cost Democrats their control of the House, and maybe the Senate, in the midterm elections Tuesday. The new Congress appears unlikely to approve more spending to try to invigorate the economy and the job market. And the Federal Reserve is running out of options.

Yet the economists the AP surveyed still expect the economy to sidestep some threats that had raised concerns in recent months. They dismiss the likelihood of a second recession, for instance, and they think the risk of deflation is remote. Deflation is a prolonged drop in prices and wages, which can make people unwilling to spend.

Comments

just_another_bozo_on_this_bus 4 years, 6 months ago

"They dismiss the likelihood of a second recession, for instance, and they think the risk of deflation is remote."

They probably didn't factor in the possibility of the Republicans gaining control of the House, though.

Clevercowgirl 4 years, 6 months ago

There is still a huge wave of residential foreclosures that will further affect the economy in upcoming months. If the Feds would slightly loosen the regs for investor loans, then prices on real estate could be somewhat buffered . If the Feds would loosen the regulative strangle hold on small investor loans, then housing prices and construction might start to improve. More construction = more goods sold and more jobs. Of course, with interest rates what they are, banks can't make much money on real estate loans. Why would they commit to a 2% investment return for 20 years.

Clevercowgirl 4 years, 6 months ago

The lenders caused this mess with interest only loans, etc. Right now, there is virtually no housing market, or construction market. That portion of our workforce is either out of work or displaced. Obviously, I am not encouraging reckless lending, just loosening the strangle hold on the investors, who historically are not a significant part of this foreclosure mess.

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