Despite a lingering, high unemployment rate, four macroeconomists said during a panel discussion yesterday that the economy will slowly emerge from the recession in the next few years and is already progressing on an upward slope.
Allen Sinai, co-founder of Decision Economics, Inc. and one of the panelists, likened the uptick to the shorter leg of an “up-tilted L.”
Sinai, co-founder of a market information support and advisory firm, said at the event, which was held at the Ford School of Public Policy, that the nation’s GDP has grown 3.5 percent in the third quarter, a reflection of slow but positive growth. He said he expects consumer spending to increase in the next few years, by anywhere from 2 percent to 4 percent.
In an interview before the discussion, Charles Evans, president of the Federal Reserve Bank of Chicago and another one of the panelists, said he foresees future growth in the economy as well.
“I think it’s probably just a little bit better than it was a couple months ago,” Evans said. “I think the big change has been since March of this year, which was probably the bottom in terms of optimism about the economy.”
Though there’s recovery in sight, Sinai said unemployment rates are still lingering at about 10 percent and added that ideally employment rates would hover around 4 percent.
The economy’s slow growth rate, according to Sinai, suggests that businesses will refrain from hiring and demand for employees will remain low for now. He described this as a cycle in which short labor demands, low income and reduced spending all act upon each other to prevent any significant economic recovery.
Evans also said in the interview that the job market will continue to be challenging for job-seekers to navigate but that college graduates may actually have an upper hand.
“Since recent college graduates are in new entry-level positions, this could be attractive for employers,” Evans said.
But Evans said entry-level jobs are no guarantee, adding that students should prepare to enter an uncertain economy.
“It’s probably a good idea to have some buffer of savings if that were possible in order to make it easier to get by if you have a hard time getting a job or to take a particular type of job that’s a good opportunity but maybe lower income than others,” Evans said.
Economics Prof. Matthew Shapiro, who was one of the panelists, said the good news is that unemployment is unlikely to climb much higher. He added that the economic growth now is good, but not great.
“It’s very hard to see how employment will fall much in the near future,” he said.
While the job market may be tough for recent graduates, Evans said students still in college will also experience remaining effects of the recession.
Evans said many public universities are encountering budget cutbacks. He added that sources from student loans are not as generous as they were the last few years, making them more difficult to come by.
“It’s a tough environment for everybody,” he said.
Founder of Computer Trading Corporation Peter Borish, another one of the panelists said tuition around the country continues to rise, placing more pressure on students and their families.
“That is the microcosm of what’s going on in the economy,” Borish said. “There’s tremendous, tremendous inflationary pressures underneath.”
During the discussion, Shapiro offered possible exit strategies for the current economic situation. He said a monetary policy currently exists that directly provides credit to the economy, adding that a similar policy “essentially saved us from the brink of the next Great Depression.”
Sinai added that with the current recovery and remaining employment concerns in mind, policymakers are attempting to accommodate current policies and foster more economic growth.
“Now the task is to use existing policies and devise new ones to make sure the recovery is sustained to put the economy on a track for full employment,” Sinai said.