The Daily Item, Sunbury, PA

News

September 8, 2011

Double-dip recession likely, economist says

LEWISBURG — A new recession is more likely than prosperity in the near future, a well-known economist told Valley business leaders during a lunch in Lewisburg on Wednesday.

"There is a 60 percent chance the country will see a double-dip recession in 2012," said Anirban Basu, chief executive officer of Sage Policy Group and keynote speaker of the chamber's economic forecast luncheon at La Primavera restaurant.

"Although the 2012 forecast is chilling, I expect a very prosperous economy in five to six years, when baby-boomers are expected to retire in greater numbers. Younger Americans -- members of Generation X and Generation Y -- will have incredible employment and advancement opportunities. As they advance to better jobs, those people are likely to buy homes, which will likely revive a struggling sector of the economy."

The Bureau of Labor Statistics shows the U.S. economy gained nearly 1.3 million jobs between August 2010 and August 2011. In the greater Sunbury area, unemployment has been steadily declining since it spiked at roughly 12 percent in January 2010, chamber officials said.

But the country is still 6.8 million jobs behind where it was in December 2007, and Basu expects it to take five or six years to restore all of those jobs.

In the short-term, he expects the economy to move backward or at least experience stalled growth.

Basu also said the housing market remains fragile and construction and sales of new homes have virtually stopped.

In addition, because of the fallout from the federal government's standoff over the debt ceiling and the ensuing stock market crisis, the economy has become unsteady, Basu said.

"I just can't see us sustaining this economy without any steady growth," he said. "Chances of recession are expanding, 60/40."

That is an increase from last September, when Basu listed the chance of a double-dip at 50/50.

Basu said the economy has hit a soft patch, but Pennsylvania is poised to weather a coming storm better than other states, because it produces a high number of necessary goods, such as food and natural resources. This kept Pennsylvania at the head of the recovery following June 2009, when the last recession ended.

— Email comments to fscarcella@dailyitem.com.

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