Dee DePass has been a Star Tribune business reporter since 1993, covering small business, financial institutions, manufacturing and, most recently, the economy. Originally from New York, Dee came to Minnesota after earning her master's in journalism at the University of Maryland and her undergraduate degree at Vassar College.

Economists warn of trouble brewing in the new year

Posted by: Dee DePass under Economics Updated: January 2, 2012 - 2:27 PM

Economists surely guzzled champagne and trotted a jig as 2011 ended happily with decreased weekly jobless-claims and an unexpected surge in holiday spending.

But just two days into the New Year, those same economists are now packing away the wine glasses and bracing for trouble.

Yes, "the U.S. economy is entering the New Year on a strong note," said Jerry Jasinowski, economist, author, and former president of the National Association of Manufacturers. "But there are clouds on the horizon that are likely to slow U.S. economic growth to 2 percent for the year as a whole. We must remember that we are still recovering from a deep financial recession."

Jasinowski worries that there are no strong drivers for economic growth; that consumer will retrench from holiday spending, and that state government budgets are contracting. He added that business capital spending "will remain subpar because of uncertainty about direction from Washington," and that export growth will slow as the dollar strengthens and global growth slows.  

The economic research gurus at IHS Global Insight noted similar concerns on its weekend note. Fresh concerns about Italy's recent bond auction and ongoing debt scenario caused IHS researchers to note "this source of volatility is here to stay."

As a result, the "first half of 2012 could look similar to the second half of 2011," IHS officials said. Beyond Europe's messy debt woes, the economic expectations for the United States were mixed. While consumer confidence improved thanks to better jobs prospects and lower gas prices, home prices are expected to continue falling thanks to foreclosure backlogs. 

On the plus side, IHS officials expect that 150,000 jobs were created in December. That's not enough to dramatically lower the national unemployment rate below 8.6 percent, but it's progress. Officials from the Economic Policy Institute say they hope 2012 is the year the ratio of applicant-to-job changes for the better. Right now they stand at four applicants for every job opening. Minnesota still has more than 193,000 unemployed jobseekers.  

 

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