Forecast: Recession will end early next year

Indiana will be out of recession by spring, but the Indianapolis area will perform so well that most people will not even realize a recession came and went.

That’s how Ball State University economist Michael Hicks sizes up prospects for 2009 in a forecast scheduled to be issued Dec. 9.

“I’m not sure that you’re going to feel a recession in Indianapolis,” Hicks, who directs the Center for Business and Economic Research, said in an interview.

Ball State economists believe the nation likely went into recession this quarter or possibly late in the third quarter, and that the down draft will last into the first quarter of next year. They expect the picture will improve beginning in spring, but companies won’t ramp up hiring until summer or fall.

The national unemployment rate will rise 1.5 percentage points to between 8 percent and 9 percent, Hicks said. However, while the figures are not high by standards of recessions, he emphasized laid-off workers will need more and more time to find new jobs. Joblessness will swell from a current average of 10 weeks to about 16 weeks early next year and then begin to shrink, he said.

The recession will be worse than the two most recent recessions – 1990-91 and 2001 – but not as bad as back-to-back recessions in the early ’80s that led to the coining of the term Rust Belt, Hicks said.

Still, people will perceive the recession is worse than it actually is due to losses in their savings accounts and retirement portfolios.

“Very few people will actually lose their jobs,” he said. “Virtually all of us will be affected by lost retirement or savings.”

This recession will differ substantially from earlier recessions because virtually the entire country and nearly all industries have gone into the downturn at about the same time. And they likely will emerge at about the same time, he said.

The recession will end in late winter or spring about as uniformly as it began, Hicks said. That suggests the end will be apparent because economic numbers and news reports will turn positive across the board.

“It’s going to come and go pretty quickly,” he said.

Indiana‘s economic growth will slow to a near-standstill, Hicks said. Production of all goods and services could fall as much as 0.5 percent after being on track to end 2008 with an increase of about 1 percent. The state usually grows by 1 percent to 1.75 percent a year.

Ongoing growth in the Indianapolis area will balance out sluggishness in other areas of the state, Hicks said. Growth will continue because people will continue to move to the area for jobs and a good quality of life.