That's true for the country and mostly true for Montana.
“We're going to be in a gloomy time for a while to come,” said Lee McPheters, an Arizona State University economist who also works with First Interstate Bank.
While some economists have sided with doom, McPheters falls on the gloomy side.
“If this is a recession, it's going to be one of the mildest ones ever,” he told about 120 people gathered for lunch at the Hilton Garden Inn. “It's certainly not as strong as the recessions of 1991 and 2001.”
As proof, McPheters pointed to a few statistics. For instance, the unemployment rate is hovering around 6 percent, but it was 6.3 percent in 2001 and 7.8 percent in 1991.
Inflation sits at 2.4 percent, but in 2001, it was 2.8 percent, and 1991 saw a soaring rate of 5.7 percent.
“The economy is weak, but it could certainly be weaker,” he said.
Still, McPheters, like most other economists, said there's not much to look forward to for the next year.
“I think the next two quarters will be very weak, and that we won't see much in the way of a recovery until the latter part of 2009,” he said.
The American economy is fueled by the consumer, who surprisingly, has held up pretty well. Part of that strength was the federal stimulus package, which accounted for about 1 percent of the economic growth last quarter.
But the consumer is becoming less likely to spend, as reflected by consumer confidence numbers that have hit 16-year lows and don't appear to be rebounding quite yet.
“The consumer has been hanging in there despite falling house prices and rising fuel prices,” McPheters said. “But the next quarters will reflect what happens when the stimulus is gone, and it's not expected to be pretty.”
In fact, although the economy grew a surprising 3.3 percent last quarter, most expect a growth rate of 0.5 percent for the year's last quarter.
“Negative growth is possible in the fourth quarter,” McPheters said.
Consumers, he said, are worried about high fuel and food prices, falling home values, a plummeting stock market, more debt and declining job growth.
“That all looks pretty weak,” he said.
Asked whether they thought gas would be under $3.50 a gallon this time next year, only 25 of Tuesday's 120 attendees raised their hands.
“That's a serious problem for the economy,” McPheters said.
McPheters did note the possible up side of Americans changing their driving habits, and said over time, the high price of oil would decrease demand and ultimately lower the price.
“Price cures price,” the economist said in pitch-perfect economist-speak.
Regarding Montana, McPheters said the state is faring better than the nation as a whole. Health care employment remains particularly strong, balancing the recent decline in construction jobs.
Unemployment is low, job growth is slow but steady, home sales are better than they are nationally, and home values are holding up much better.
Still, Montana has seen both home sales and new housing starts decline, and that won't change much for at least a year.
On the other hand, Montana doesn't have near the subprime mortgage problems other parts of the country have.
Montana has far fewer subprime mortgages on a percentage basis, and thus has far fewer foreclosures. Nationally, 17.1 percent of subprime, adjustable-rate mortgages are in default. In Montana, only 9 percent are in foreclosure.
McPheters said that nationally, housing prices probably will fall to 2004 levels before stabilizing and starting back up.
“They probably need to come down 15 percent or so to reach that level,” he said.
That won't make consumers feel any better over the short term, but the decline will eventually lead to higher prices.
“There's a persistent demand for homes,” he said.
McPheters offered an economist's poem in wrapping up his outlook:
2008 - won't be great
2009 - continue to whine
2010 - growing again.
Reporter Michael Moore can be reached at 523-5252 or by e-mail at mmoore@missoulian.
com.
|
 |
 |
Add your comment now! Write your comment in the form below.
(Email address is for verification only. If you'd like to email a story, look for the link above)