Economy keeps experts guessing

A few weeks ago, University of Nebraska-Lincoln economist Eric Thompson expected the economic recovery to continue working the nation out of the Great Recession of 2009.

But sour economic news the past several weeks — on manufacturing, housing and business investment especially — has flipped Thompson into the cadre of economists who believe the economy is headed for a “double dip” and may be turning backwards even now.

Thompson, director of UNL's Bureau of Business Research, is the primary author of the state's quarterly economic forecast. He said Friday that his personal opinion — not the forecasting board's — is that the economy “has sputtered out,” and the risk of the nation falling into recession is back.

Some other members of the forecasting group are sticking to last month's prediction of continued economic recovery, despite Friday's downward revision of the nation's economic growth rate between April 1 and June 30.

“It's still slow growth,” said Ken Lemke, economist for Nebraska Public Power in Columbus.

Indeed, although the growth rate was revised downward Friday, at 1.6 percent it still was higher than projections. That, and a promise by Fed Chairman Ben Bernanke to do what was necessary to prop up the economy, led to a 164-point gain in the Dow Jones industrial average.

Disagreement is part of the landscape for economists, who can draw different conclusions from the same government reports on economic activity.

Chris Decker of the University of Nebraska at Omaha and Tom Doering of the Nebraska Department of Economic Development said they don't expect a repeat recession.

“We know for certain that the recovery is slowing,” Decker said. “But I don't see a double dip. I see an increased likelihood of a double dip, but we'll need more information as we proceed.”

The economy is in for a “long slog,” he said. “Digging out of this is going to take a little longer and be maybe more painful than we would like.”

Job growth over the past 18 months, although slow, has been comparable to recoveries from other recent recessions, he said.

“We definitely are not adding enough jobs, but there's reason to be hopeful. The numbers bounce around, which makes it difficult to get a real handle on success or failure,” Decker said. “When we start seeing some healthy trends, then the sense of a recovery will start to become clear.”

Doering pointed out that Nebraska's economy benefits from good grain prices, especially for corn and wheat, and the state continues to be affected less by national downturns in housing and the financial industry.

Tourism spending in the state is up about 5 percent from last year, and Nebraska's unemployment level is about half the U.S. average.

“It's true that we might scale down somewhat from what we were predicting in the way of employment growth, but it still would be growing,” Doering said.

Friday's gross domestic product report lowered the measure of the economy's second-quarter growth from an earlier estimate of 2.4 percent and is significantly less than the first quarter's 3.7 percent pace.

Thompson said the country has gone from slow but steady recovery to negative or negligible growth.

He believes most economists are leaning to the double-dip view these days, even if they haven't said so.

“It isn't just that the chance of a bad outcome has gone up. The whole situation has deteriorated.”

Contact the writer:

444-1080, steve.jordon@owh.com

« Metro/Region

Share