Strong growth is ahead, economist says
10/28/2009The U.S. economy likely will enter a period of strong growth in coming months, but the picture is less clear for northwest Ohio and southeast Michigan, a leading economist said in Toledo yesterday.
Ken Mayland predicted the recovery likely will follow the pattern of past recessions when Toledo and other cities in the industrial Midwest, New England, and mid-Atlantic states were the "first in and the last out."
"We will lag the national trend," he said in response to a question after a talk at the Toledo Club. He spoke to about 140 people at a breakfast program sponsored by KeyBank.
That comment was one of the few down notes in a generally upbeat assessment of economic trends.
"Today we have hard evidence that the recession is over," said Mr. Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio.
Two signs, he said, are a gradual decline in initial claims for unemployment benefits that began in March and an eight-month long rise in an index of corporate spending that is based on a survey of purchasing managers.
When economic figures are released for the third quarter, they likely will show that the U.S. economy began to grow for the first time since the recession began in December, 2007.
Economic growth following more severe recessions like the current one typically is stronger than after mild downturns, he added. As a result, Mr. Mayland foresees increases larger than the 3 percent annual growth typical of the U.S. economy.
"The stage is set for a rate of above-average growth" for up two years, he said. The manufacturing sector will participate in the recovery, he added.
He blames the economic crisis on tight credit and the run-up in oil prices from mid-2007 to mid-2008. They created conditions that "scared the living daylights out of consumers and businesses," the economist said.
He predicted that the Federal Reserve Board will begin to raise interest rates next year to try to head off inflation after injecting huge sums into the economy to deal with the crisis.
A so-called "double-dip" - or repeat - recession is possible, though not likely. It would be extremely unlikely before late 2010 or early 2011, Mr. Mayland said.
Strong recoveries in other economies around the world, along with a weak U.S. dollar, will create opportunities for U.S. exporters, he said.
The economist said that commercial real estate will continue to be a drag on the economy, possibly until 2012.
Speaking about the tardy recovery he sees for Ohio, Mr. Mayland cited the state's lack of competitiveness with other areas. It ranked 45th out of 50 states on one measure of competitiveness, the economist added. Michigan ranked 34th.
And, despite his rosy forecast for the U.S. economy overall, he offered a caveat.
High unemployment and other problems will present challenges in coming months.
"Recovery means the direction of the economy has changed," Mr. Mayland said. "Recovery is not synonymous with recovered."
Contact Gary Pakulski at:
gpakulski@theblade.com
or 419-724-6082.