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CUNA economist rates economy on IBloomberg RadioI
MADISON, Wis. (1/12/09)--The U.S. is in a severe recession--which “doesn’t bode well for the future,” although there are some silver linings, a Credit Union National Association (CUNA) economist told Bloomberg Radio Friday. Steve Rick, CUNA senior economist, commented on the Labor Department’s unemployment numbers for December and President-elect Barack Obama’s stimulus package on the “Bloomberg Countdown” show. Employers cut another 524,000 jobs in December, the Labor Department reported Friday. The economy lost 2.6 million jobs in 2008--the most since the end of World War II in 1945. The nation’s unemployment rate jumped to 7.2% in December, from 6.8% the previous month and the highest level in almost 16 years (The Wall Street Journal Online Jan. 9). “A lot of economists expected a more severe drop [in employment),” Rick said. “But we’re seeing an extreme downturn of the labor market. We’re in a severe recession, which doesn’t bode well for the future--it indicates a drop in spending.” Will the layoffs continue? “Yes,” Rick replied. “We’re in a self-reinforcing downward spiral. That means consumers are spending less, so there’s less production and jobs are being shed. The December unemployment numbers didn’t surprise people--it shouldn’t affect the market that much.” However, Rick said there is a psychological effect of the layoffs on people, and consumer confidence is at a nearly record low. Also, things will likely get worse before they get better--economists expect a 9.5% national unemployment rate sometime in 2010, he added. On the bright side, the consumer savings rate is up to nearly 2.8%, Rick said. “And people are paying off credit cards in case they are the next to be laid off.” Obama’s federal stimulus package now stands at about $800 billion to $900 billion and “hopefully will pass” before Congress recesses around the middle of February, Rick said. “It may take awhile for the stimulus plan to get going, so it probably won’t have much effect in the first half of the year,” he added. To restore jobs now, the federal government should give out “state block grants,” that states can use as they see fit, because many states are in financial trouble. The grants would help them refrain from having to cut some spending, Rick explained. Some industries are way down--such as residential construction--because of too much unsold inventory. “Not too many new homes will be built this year,” Rick said, However, other industries--such as government jobs, health care and education--are picking up, he said. “In a recession, people go back to school to learn new skills, and with an aging population, it helps the health care industry,” Rick explained.
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