Tuesday, May 22, 2007

Indiana, U.S. economies to log sluggish growth, recession possible

The Indianapolis Business Journal reports that the state and federal economies are not going to get much better in the coming year:

Indiana University economist Bill Witte said the forecast was in step with how IU economists foresee the rest of the year unfolding both nationally and at the state level.

Indiana employment levels will remain stagnant at slightly more than 3 million, predicted Witte, who did not participate in the National Association for Business Economics forecast.

To blame are the housing slump and high gas prices, which hurt domestic automakers supplied by Indiana factories, Witte said.

"Manufacturing is still struggling," he said.Manufacturers in the state had 557,300 on their payrolls in April, a slight improvement from a year earlier, according to the Indiana Department of Workforce Development.

National Association for Business Economics forecasters said the main culprit at the national level is the sour housing market. It fell into a slump last year after a five-year boom. Nearly half of the forecasters think the housing market will not reach its bottom until this winter or later.

Even so, the employment climate should continue to weather the fallout from the housing slump, the forecasters said.

They predict the unemployment rate for 2007 will match last year's rate of 4.6 percent, a six-year low.

For the most part, employers have shown a decent appetite to hire even as the economy, as measured by the GDP, has lost momentum.

GDP is the value of all goods and services produced within the United States. It is considered the best barometer of the country's economic standing.

For next year, the forecasters believe the economy will grow by 2.9 percent, somewhat sluggish and lower than the earlier forecast of 3 percent.

The unemployment rate might edge up to 4.8 percent next year, according to the survey of 48 forecasters that was conducted April 19 through May 8.

More than half of the forecasters said there was at least a 25 percent chance of a recession getting under way within the next year. Earlier this year, former Federal Reserve chief Alan Greenspan put the odds of a recession at one in three.

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