The worst recession in decades is clearly coming to an end, but job losses will continue to hamper the economy, the nation’s largest business lobby predicted Thursday.
The U.S. economy will grow at a rate of 2.5 percent to 3 percent in the third quarter, U.S. Chamber of Commerce chief economist Martin Regalia told reporters.
“I think we are out of this economic downturn,” said Regalia, who described the recession as the worst one the U.S. economy has faced since the Great Depression. He said the National Bureau of Economic Research months from now will probably pinpoint the recession as having ended in the third quarter.
But Regalia warned it could take years to create enough jobs for the economy to get back to its standing before the recession began in December 2007.
The nation’s unemployment rate stands at 9.4 percent but is expected to rise when the August jobs report is released on Friday. Regalia said the unemployment rate will likely near or top 10 percent in the next few months.
He also said it will take time to find jobs for the unemployed because of the explosion in “marginal” workers who do not work full-time, and “discouraged” workers who have left the labor markets. Such people are unemployed, but are not looking for work and so are not counted in the unemployment rate. The Chamber estimates there are 800,000 such people in the country.
The recession has cost the nation about 7 million jobs, and the economy needs to create about 1 million jobs annually. Regalia said he’s seen projections that it will take five years for the economy to create the 12 million jobs necessary to meet that demand.
“This is a daunting task,” Regalia said, and will force the economy to grow beyond average expectations.
All of this suggests a tough climate for lawmakers headed to the polls in November 2010. While the economy is likely to be in recovery mode, unemployment rates would linger.
Regalia credited the $700 billion Troubled Asset Relief Program for stemming the financial crisis and preventing the banking system from following investment banks into oblivion. He also said the stimulus, while not as “concise” as the Chamber would have preferred, is helping to bridge the economy to the point where the private sector will continue to grow.
Congressional Republicans and Democrats are engaged in a public relations battle over the stimulus, with the GOP describing it as a failure and Democrats hailing its benefits.
The record U.S. budget deficit is also expected to be an issue in 2010, and Regalia warned that U.S. debt levels are unsustainable. He predicted tensions between the Federal Reserve and White House will grow next summer as the Fed faces pressure to end its intervention in the economy to prevent inflation. That could slow economic growth, to the disadvantage of Democrats in power.
The Fed deserves tremendous credit for a series of unprecedented steps to stifle the recession, Regalia said.
Regalia said the Chamber supports Obama’s decision to renominate Fed Chairman Ben Bernanke to a second four-year term, and he urged Congress to move his confirmation “in short order.”
The Chamber is not predicting that the economy will slide into a downturn again next year, and instead forecasts growth in the second half of 2010 of less than 2 percent. However, Regalia said a “double-dip” recession is still possible, and warned the economy could be negatively impacted by the uncertainty of healthcare and climate change legislation.
He also argued against policies favored by the president and Democratic Congress that would increase taxes on businesses or on upper-income taxpayers. Regalia argued this will not bring in the additional revenue the government needs because of the downturn, and will instead stifle the economy.
The Chamber supports moving immigration legislation that would set up a temporary-worker program and provide a pathway to legalization for illegal immigrants. But Chamber Vice President Randy Johnson said he did not think Congress would take up an immigration bill in 2010, and said politically it would be more likely a bill would be considered in 2011.