Leading Economists Hopeful About Michigan's Future
date: February 28, 2011
SOURCE:Detroit Free Press
Mark
Zandi, chief economist at Moody's Analytics in West Chester, Pa., and
Diane Swonk, chief economist at Chicago-based Mesirow Financial,
predicted that Michigan would experience job gains this year. However,
the state's economic growth will continue to lag behind the national
average, they said.
A
big reason for their upbeat outlook: stronger auto sales. Even with gas
prices soaring, Zandi forecasted that over the next three years, sales
of new cars and trucks would likely increase from 12.5 million units to
at least 15.5 million.
"We're now in an environment of what I call 'pent-up demand,' " he said. "Prospects are very good."
The economists shared their views at a meeting of the Detroit Economic Club at Cobo Center.
Zandi
and Swonk expect the economy to grow by 3.5% to 3.7% this year. But
they cautioned that it would take until at least 2014 for the nation's
unemployment rate to fall to more normal levels of 5.5% or 6% from
January's 9% rate. Michigan's seasonally adjusted jobless rate stood at
11.1% in December, the latest month for which data is available.
Both
economists expressed concern about the widening gap in income and
wealth between the rich and everyone else. "We need to address the
skewing of income distribution and wealth," Zandi said, noting that the
Wisconsin protests are a signal of this problem.
Swonk said the economic recovery is being driven by higher-income households.
She urged policymakers to come up with solutions to help people unemployed over the long term.
Income inequality was just one of a number of topics discussed. Here's what the economists said about other key issues:
• The housing market: Swonk
predicted that U.S. home prices would bottom out by year's end or early
2012, comparing the situation to "a dead cat bounce." In Michigan, she
said, there is "not a lot of room (for home prices) to go much further
down."
• Inflation: Zandi
said weak wage growth and other factors would keep prices in check this
year and next, but acknowledged that inflation could become an issue in
2013 and 2014.
• Surging oil prices: Zandi
expected oil prices to settle down as long as the Middle East political
unrest doesn't spread to Iran. If oil goes to $140 a barrel, the
country is at risk of a double-dip recession, Swonk said.
• Government layoffs: About
400,000 state and local government jobs have been shed since this
sector's peak employment a little more than two years ago, Zandi said.
Though the worst of the job losses is occurring now, he noted that
states would be in a much better place next year, helped in part by
rising tax revenues as the economy strengthens.