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October 31, 2009

Economist: Recovery still hangs in the balance

Alan Mauldin

MOULTRIE — Strong economic growth for the third quarter of the year could indicate that the recession is coming to an end early next year — unless it doesn’t, that is.

The impact of the economic stimulus, particularly the Cash for Clunkers program, fueled consumer spending that drove a 3.5 percent rate of growth to the economy, said Aaron Johnson, an economics professor at Darton College in Albany.

However, the chance for a weak recovery or even a reversal balances on a number of factors, he said. Those include a rise in energy costs, another dismal holiday shopping season, more problems in the Middle East or an increase in interest rates by the Federal Reserve to stave off potential inflationary pressure.

“We all need to watch the efforts of the Fed in coming months,” Johnson said. “There is some pressure to raise interest rates. I can see next quarter them raising interest rates and that could forestall recovery. That is something to look at.”

There is legitimate concern, Johnson said, that an uptick in consumer spending, coupled with low inventories retailers are keeping in stock, could lead to price increases.

The 3.5 percent annual rate of growth for the third quarter was announced Thursday.

Last week the Georgia Department of Labor announced that the jobless rate in Southwest Georgia increased from a revised 9.9 percent in August to 10.2 percent in September. In Colquitt County the unemployment rate was up 0.1 percent, from 8.9 percent in August to 9 percent in September.

Among nearby counties, Cook County had the highest jobless rate at 11.9 percent, up from 11.7 percent in August.

Johnson predicted the economy could climb out of the recession early in 2010, but that unemployment may not drop appreciably until the second or third quarter.

“A lot of economists feel the recession is officially over,” he said. “The concern is how strong this recovery will be. There is always going to be a lag between job recovery and the economy improving.”

The National Bureau of Economic Research, which makes official declarations of recessions and recoveries, will look at more than a quarter or two of economic expansion in making its determination, Johnson said. Those factors are business investment, unemployment trends and economic activity.

“The labor market is still sluggish,” he said. “It will be interesting to see how strong this economic recovery is. If there is not strong spending for the next few months we could see business investment contract.”

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