Economist shares mostly good news with ChamberThe economy, says Scott A. Anderson, is like the little engine that could. It’s on track, slowly pushing forward. “We’re on the road to recovery,” Anderson, Wells Fargo’s senior economist, told a gathering of businesspeople at a Duluth Area Chamber of Commerce luncheon on Friday.
By: Candace Renalls, Duluth Budgeteer News
The economy, says Scott A. Anderson, is like the little engine that could.
It’s on track, slowly pushing forward.
“We’re on the road to recovery,” Anderson, Wells Fargo’s senior economist, told a gathering of businesspeople at a Duluth Area Chamber of Commerce luncheon on Friday.
Anderson had lots of good news to share as he gave his annual economic forecast. Looking back on 2011, he said it ended on a positive note. Consumer confidence is up. Jobless claims are down. Job creation is up. Manufacturing and small business is picking up. Pockets of new home construction finally are happening around the country. And the gross national product has been growing for two years.
“So we’re moving in the right direction,” he said.
But Anderson doesn’t think the growth will continue without setbacks.
Although 2012 is starting strong, he expects a slowdown in the first two quarters before growth resumes. He likened it to taking two steps forward and one step back.
While the unemployment rate has been declining, he is skeptical. The monthly rates don’t include those who have dropped out of the labor force. So that 8.5 percent U.S. unemployment rate in December is more like 16 percent if you factor them in, he said.
Disposable income — critical in boosting still-lagging consumer spending — is declining, and many people have used up their savings, he said.
Although mortgage interest rates are at record lows, the demand for homes remains flat.
“Way too many have not been making their mortgage payments, which will drag the housing market in 2012,” Anderson said.
Europe’s debt problems and an economic slowdown in Asia have a lot to do with Anderson’s cautionary economic outlook.
“We think a recession is already under way in Europe,” Anderson said. “We’re seeing signs the financial crisis in Europe may be intensifying.”
And that makes risks of another recession in the United States as high as 50 percent, some experts say.
Jim Skurla, a University of Minnesota Duluth economist, agrees that Europe is key.
“It could upset the whole world economy,” he said.
That’s because America is exporting so much more overseas than it used to.
“Our economy is normally strong, but because we are so tied in with Europe with our exports, we could get dragged down into their problem,” Skurla said.
But as long as they buy U.S. products, our economy will recover, he said.
That represents a major change from the way things used to be.
“Years ago, we were the driving force,” Skurla said. “The world reacted to what we did. Now it’s turned around. We rely on them purchasing our products.”
Mining — one of Northeastern Minnesota’s leading industries — has come back strong since the recession with new mining operations coming on board. But Anderson said additional expansion would be unwise, in part because of the economic slowdown occurring in China, a major importer of American steel.
“The super rally is coming to an end,” Anderson said after his presentation. “We’re plateauing, and there’s a chance of a hard landing.”
Skurla agreed, up to a point.
“China was mainly a purchaser,” he said. “They’re building their capacity up at the same time we are. We’re both growing and trying to grow fast.”
But he doesn’t think the mining industry is overbuilding.
“World economies need resources,” he said. “As the world grows, they’re going to need more resources.”