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IU economists forecast tepid growth in 2010

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Indiana University economists offered a cautious but improving economic outlook for 2010, in which they expect the personal income of Hoosiers to grow slightly and the state to add 50,000 jobs.

A panel of four IU economists presented their annual forecast Thursday morning at the Columbia Club downtown, and will provide their outlook in nine other cities across Indiana through Nov. 18.

Although economic indicators appear to be improving, the panelists predicted it will take three to five years to fully recover from the worst recession in a generation.

The Indianapolis metropolitan area, however, should bounce back quicker than the state as a whole, because the city is less reliant on manufacturing jobs, said Kyle Anderson, an IU business economics professor. (See video below.)



“Things seem to be steadying out, if not improving,” he said.

The non-seasonally adjusted jobless rate in the Indianapolis metro area was 7.7 percent in September, nearly 2 percentage points lower than the state average. Still, Anderson said, 70,000 Hoosiers in the city remain out of work, roughly double the number from two years ago.

Statewide, the number of unemployed hit 200,000 in September, with half of those employed in the manufacturing sector, said Jerry Conover, director of the Indiana Business Research Center.

He predicted the state could regain up to a quarter of those jobs next year, although he expects unemployment rates to remain above 9 percent for most of 2010. At the same time, personal income should grow about 2 percent.

The government, construction and health care sectors will fare relatively well in any job growth Indiana might experience, Conover said.

“Forty to 50,000 jobs could be added through 2010,” Conover said, “which would be a welcome sign after a couple of tough years.”

But the severity of the nationwide recession will temper any prospects for a robust recovery, said Bill Witte, an IU associate professor of economics.

“I have some good news and some bad news,” he said. “We expect 2010 will be better than 2009. The bad news is that 2009 has been really, really awful.

Indeed, the panel last year predicted the downturn would last just through the middle of this year. The country’s economic output has fallen nearly 7 percent the past few years and employment has dropped 21 straight months, leaving 7.2 million people unemployed.

Witte expects economic output to grow 3 percent next year, which is about average, while total job losses could reach 8 million, pushing the national unemployment rate above 10 percent. It was at 9.8 percent in September.

“It’s not the kind of recovery you would normally expect after such a deep downturn,” Witte said. “The deepest recessions are usually followed by rapid recoveries.”

One piece of positive news is that inflation will remain low through next year. Many economists, including Witte, fear it could climb in 2011, as federal stimulus money floods the market.

“Beyond 2010, things get a lot more murky,” Witte said, “and maybe more dangerous.”

Other highlights from the forecast include:

—moderate growth in the housing market and slowly rising home prices.

—interest rates rising slightly but remaining low by historical standards.
 
—energy prices trending higher than in 2009 but remaining far below the peak reached in 2008.

—business profits continuing in most sectors due to major cost costing that has occurred.



 

 

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  • Anderson Rocks
    Dr. Anderson's comments are right on the "money" every time. Great job. Dr. Witte, on the other hand, is locked in the exact kind of inherently flawed economic "reasoning" that got us into this mess in the first place. More Anderson. Less Witte. Period.
  • Hi
    Outlook 2010

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