CONTACT: James Gwartney(850) 644-7645; [email protected]
By Jill ElishJanuary 2002
BRIGHTER DAYS ON THE HORIZON, FSU ECONOMIC FORECASTER SAYS
TALLAHASSEE, Fla.-The economic forecast is looking brighter this year, according to a Florida State University economics professor who says the United States should begin climbing out of the recession in the second or third quarter of 2002.
However, sluggish growth is likely and the unemployment rate - already at 5.7 percent - may get worse before it gets better, according to James Gwartney, who served as chief economist for the Joint Economic Committee of the U.S. Congress in 1999-2000 and was part of an international team who advised Russian President Vladimir Putin about economic reform in 2000.
"Policy changes always impact the economy with a time lag," Gwartney said, explaining that the recovery expected later this year is the result of policies instituted in 2001. Gwartney maintains that the recession, which officially began in March 2001, was a result of high oil prices, high taxes and the restrictive monetary policy pursued in 2000.
"This recession was made in Washington as a result of bad policy on the part of both the Federal Reserve and Congress," he said. However, no one could have predicted the terrorist attacks of Sept. 11, and industries such as air travel and tourism may take as many as two or three years to recover fully.
Laid-off workers who have a broad set of skills should be able to find other employment, but it will be more difficult to find jobs in the immediate months ahead. Those just entering the work force this year can expect lower starting wages.
Although 2001 was not a good year, economically speaking, there were a few sunny spots. Reduced prices and attractive incentives actually made 2001 the second best sales year - in terms of number of cars sold - in the history of the automotive industry, and the housing market remained steady, Gwartney said.
Consumers also have been finding bargains at the retail stores, a trend that will probably continue for a few months.
"We'll likely see a continuation of low inflation throughout this year," Gwartney said. "As long as retailers see the demand for products as weak, price increases will be limited."
# # #
RSS