GSU expert: Economic pain easing, but slowly

By By Michael E. Kanell

The Atlanta Journal-Constitution

It is not enough for the economy to stop dropping. It still needs a lift.

So says Rajeev Dhawan, director of the Georgia State University Economic Forecasting Center, who expects only the most modest climb in the state’s economy until it is propelled by investment, construction and consumer spending.

“The free-fall is over, but you can’t say the recovery has begun,” he said during the center’s quarterly economic conference Wednesday. “The issue is, what is going to propel growth? What is going to produce jobs?”

Despite continuing job losses, a rising chorus of forecasters has declared the recession over. Both University of Georgia’s Jeffrey Humphreys and Roger Tutterow of Mercer University last week said the economy’s decline ended earlier this summer.

The semi-official arbiter of recessions, the National Bureau of Economic Research, defines recession as a “significant decline in economic activity” that is usually seen through income, jobs, production, consumption and the gross domestic product.

Dhawan declined to forecast when the economy will turn toward growth -- or whether it already has. “Whatever the ending date, it is going to be the same thing -- bouncing along the bottom.”

The national economy will probably grow this quarter -- but at less than 1 percent -- then shrink at a similar pace in the fourth quarter, he said.

Georgia’s unemployment rate will likely rise to 11 percent next year, from 10.3 now, while the state will shed 43,800 jobs, Dhawan said.

That’s because the usual growth engines remain weak, he said. The drop in housing sales hurts consumers, who spend less. That drags down business profits, causing layoffs, holding back raises and pulling the plug on new investments.

Dhawan sees tepid job growth in 2011, but by then, he said, the state will have lost 360,000 jobs, or roughly one of every dozen payroll positions.

However, he does not expect a national “double-dip” recession, in which the economy briefly expands and then falls again. “The chances are not that high,” Dhawan said. “I would say that the probability is 20 to 30 percent.”