The economic recovery will grind slowly forward next year, extending this year’s modest improvements but not breaking out strongly enough to significantly affect unemployment and household income, economists John Mitchell and Grant Forsyth said today.
Speaking at a Greater Spokane Incorporated forecast breakfast, Mitchell said businesses are delaying investment decisions because of uncertainty regarding future tax policy, health care reform and environmental regulation.
Paralysis on Capitol Hill has put the levers of economic stimulus in the hands of the Federal Reserve, which is keeping interest rates low and expanding the money supply in an effort to fuel more investment and consumer demand, he said.
Meanwhile, Mitchell said, consumers are repairing personal balance sheets by backing off on the use of credit.
Household wealth has plunged by $11 trillion since peaking in 2007 and housing prices, the foundation for much of that wealth, will continue to lose value in 2011, he predicted.
“This isn’t over,” said Mitchell, an independent consultant and former chief economist for US Bank.
Eastern Washington University Professor Grant Forsyth said he expects some job growth in Spokane and Kootenai counties, but unemployment will remain above eight percent.
Rates in neighboring counties will be higher, he said.
Forsyth said per capita income may increase slightly, but home prices will continue to fall by around four percent. Public projects are propping up commercial construction activity, he said, warning that sector is headed for a fall without more private-sector building.
Forsyth said rural counties are much more dependent on government jobs and transfer payments like Social Security and Medicare. If government austerity measures cut those benefits, the economies in outlying areas will be disproportionately affected, he said.