Economic outlook for 2010

The last couple of years have been tough ones for economic forecasters, what with some dramatic changes -- most of them negative. We had the housing bubble burst, the financial sector meltdown, oil prices soaring and an economy in panicked retreat. More than 7.2 million jobs have been lost so far.

While there have been some encouraging hints, the day-to-day situation remains shaky. Will a recovery take hold this year? Will we get job growth? Will growth trigger runaway inflation? Will interest rates stay subterranean?

To get answers (or at least some educated guesses) the Atlanta Journal-Constitution recruited four professional economists to predict how a few fundamental indicators would fare in 2010. We also polled the students in Janet Hansen’s economics class at McIntosh High School in Peachtree City.

Here are their forecasts, along with some of their reasoning.

We’ll check back every three months or so to see how their predictions are faring, and early next year, see just how close their predictions came to reality.

The questions

1. What will U.S. GDP growth be during 2010?

2. How many jobs will be gained or lost by year’s end? What will the unemployment rate be?

3. What will inflation be for the year (as measured by the Consumer Price Index)?

4. What will the benchmark interest rate (Federal Funds Rate) be at year’s end?

5. How much will the stock market either gain or lose by year’s end (in percent, as measured by the Dow Jones industrial average)?

6. Key factors?

Rajeev Dhawan, Georgia State University, Economic Forecasting Center

1. 2.5 percent

2. Loss of 350,000 jobs; 10.4 percent

3. 1.7 percent

4. 0.50 to 0.75 percent

5. Down 9 percent

6. “If the health of the banking sector improves significantly in the next six months, that would improve the flow of credit to small- and medium-sized businesses.”

Jeff Humphreys, University of Georgia, Selig Center

1. 2.3 percent

2. Gain of 900,000; 10.4 percent

3. 2.4 percent

4. 1.0 percent

5. Up 12.1 percent

6. “There are two big imbalances. One is the commodity markets. More troubling are the sovereign [foreign] debt markets like Dubai. That is capable of causing some real trouble.”

Rex Macey, Atlanta-based chief investment officer, Wilmington Trust

1. 2.8 percent

2. Gain of 750,000; 9.5 percent

3. 2.0 percent

4. 0.50 percent

5. Up 5.0 percent

6. “There is a risk that we are not really out of the recession, that we will backslide. The economic indicators pointing to recovery are pretty anemic.”

Mark Vitner, senior economist, Wells Fargo

1. 2.7 percent

2. Gain of 600,000; 10.5 percent

3. 2.3 percent

4. 0.5 percent

5. Up 4 percent

6. “For things to be better than my forecast, the financial sector would have to get healthier a whole lot quicker so credit would flow more freely and allow businesses to pick up. That has a relatively low probability, but it’s possible.”

Janet Hansen’s economics class, McIntosh High School

1. 2.5 percent

2. Gain of 400,000* ; 10.5 percent

3. 3 percent

4. No change

5. Up 5 percent

6. “Part of the stimulus law were tax cuts for the middle class and you saw that [halfway through 2009], the GDP did begin to rise. I think that will continue. ... I think that jobs are being created by government programs but that the unemployment rate is going to increase as discouraged workers re-enter the labor force.” (Senior Melissa Manson, pictured)

*Figure splits difference between class’s optimists (1 million gain) and pessimists (600,000 loss)

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