Economists Predict End of Nation's Recession in 2002

The N.C. Bankers Association released a report Jan. 3 stating that the nation's recession will be "short and shallow" because several factors, primarily growing consumer confidence.

Harry Davis, a NCBA economist and professor at Appalachian State University, said the recession will be short-lived.

"This recession should continue until about the end of the first quarter (of 2002), making the duration about 12 to 13 months," he said.

Davis attributed the predicted brevity of the economic downturn to a rise in consumer confidence and a strong housing sector.

But he added that North Carolina will not benefit from the improving economy as much as other parts of the nation. "The state economy will grow slower than the national economy this year," Davis said.

Mickey Levy, chief economist for Bank of America, also issued a statement on the optimistic economic outlook, emphasizing that the turnaround will not occur until the second half of the year.

Levy pointed to monetary and fiscal stimuli, lower energy prices and effective price adjustments as factors that will boost the economy.

Last year, Congress passed a bill authorizing $40 billion in tax relief, and an additional $70 billion was approved this year. In response to the events of Sept. 11, Congress approved the allotment of $40 billion for national security and emergency relief.

Levy said these efforts, along with the the Federal Reserve Board's decision to decrease interest rates, will result in an economic rebound.

"Consumer spending will rise, housing activity will remain firm," he said. "Over the next four to six quarters, businesses will increase production and resume a moderate inventory building. This will add 1 percent to (gross domestic product) growth."

While Levy said he expects an economic comeback, he said he does not think that unemployment rates will see a similar change.

"Employment is expected to continue to decline modestly through (the first quarter of) 2002 even as the economy recovers," Levy said. "The unemployment rate is expected to drift sideways as businesses increase production without adding significantly to their payrolls."

UNC economics Professor James Wilde also said the economy likely will improve.

"My expectation is that the economy will turn around during the year and start to expand again," he said. "When this will happen is not easy to predict. I would expect that by the second half of the year, the economy will have improved."

Wilde credited government efforts -- such as spending for wartime and recovery expenditures in New York -- as significant help to the economy. He also said that tax cuts will contribute to a turnaround. Wilde said, "Tax relief will be forthcoming and turn the economy in a positive direction."

The State & National Editor can be reached at stntdesk@unc.edu.