2009 forecast: a long, hard recovery
CBE Dean Anil Puri predicts a half-percent growth of GDP in 2009, worst since 2001
Published: Sunday, November 2, 2008
Updated: Sunday, November 2, 2008
The unstable economy has created a "once in a lifetime credit-tsunami," former Chairman of the Federal Reserve Alan Greenspan told Congress last Thursday. Experts reiterated the seriousness of the nation's credit problems at the 2009 Economic Forecast Conference on Oct. 30 at the Hyatt Regency in Irvine.
The 14th annual event hosted by the Orange County Business Council and Cal State Fullerton’s Mihaylo College of Business and Economics, featured analysis of the current economic state as well as a predication for what is to come in 2009.
Dean of the College of Business and Economics and keynote speaker Anil Puri predicts a half-percent gross domestic product growth in 2009 (the lowest rate of growth since the 2001 recession), and a national unemployment rate of 6.8 percent. He predicts housing values to continue to decline over the next six months before stabilizing in the second half of 2009.
The economic downfall began first in Orange County and spread rapidly throughout the nation. Because it hit California first, it is logical that we will be the first to recover from this financial disaster, Joseph Otting, vice chairman of U.S. Bancorp, said. In the past, California has always been the first to pull the nation out of a financial crisis, Otting added.
Fortunately, the election will be over in a matter of hours and we will have a new president to take control of the problem, Puri said. The nation can expect more aggressive action by the government with controlling spending, although it will be at least six months before we see the effects of decisions made by the new president.
“From a student’s perspective it makes you want to network as much as you can now and stay in school longer,” Elise Lopez, president of the Business Inter-Club Council, said. “It is going to be harder for us to get jobs after we graduate now. But there is a lot to learn from this situation.”
Puri said the government will still provide student loans – although it will be cutting back in other areas – but student loans is one area of financial support that will continue to be available to students.
The Oct. 13 cover of Time magazine displays iconic images of the Great Depression, with the cover story titled, “The New Hard Times.”
This may prompt some students to ask if this scenario could reoccur, affecting them as they venture out into the business world.
According to Assistant Professor of Economics Ermira Farka, the situation has not yet reached the magnitude of the Great Depression, and it is unlikely that it will.
The current economic disaster will most likely inspire change in the way that Americans use credit, Farka said. We already see consumers pulling back and becoming more conservative with their money. With 71 percent of the economy based on consumption spending, even a small drop in spending can have a major impact on business nationwide. Unfortunately, this will chip away at the economy because consumers are hesitant to spend and contribute to the economy.
And although it will be at least three to four quarters (nine months to a year) before the economy begins to improve, California is still a reliable state to live in, Puri said.
In the future there will be changes in “oversight” of all financial institutions and they will be much more conservative with giving out loans and mortgages, Otting said. He added that there is a lot of knowledge that can be gained by students from understanding an economic crisis.
Puri noted that there were five Wall Street banks that were operating two months ago that no longer exist. He also said that 760,000 jobs have been lost nationally in the last nine months, 401(k)s are diminishing, and the nameless faces of America are dealing with the hardest economic crisis they will probably ever experience. The stock market has jumped and plummeted repeatedly over the past year and that has dramatically effected the economy.
“We will recover,” Farka said. “But it will be a very slow recovery.”
For most Americans, there are things that can be done to predict what will happen in the economic future.
People should always be mindful of the stock market and watch the bank stocks in particular for negative indicators. Investors should also watch what the S&P (Standard and Poor’s 500 Index Stock Forecast) reports because they are the only company with access to stock portfolios and balance sheets, and they make good predictions as to what will happen to the stock market, Otting said.
Also, if individuals already have money in stocks, they need to keep their money invested and wait it out. Puri said that when the stock market goes down it eventually has to go back up.
“Students should absorb as much information as they can during this time. This will only happen once in their lifetimes," Otting said.
The financial model we have been using now presents a danger to our nation, Puri said, adding that the many flaws in our system have been pointed out and it is time for innovative change.
For a more detailed report of the 2009 economic forecast, students can visit the business page on CSUF's Web site.
