The country is in a “nasty recession,” but will come out of it probably stronger, a national economist told attendees at the Bellevue Chamber of Commerce Eastside Economic Forecast Breakfast on Thursday.
Joseph Quinlan, managing director and chief market strategist for Bank of America, said the downturn is different from past recessions in that it is consumer led.
What has happened to the country, Quinlan said, is that people, faced with bad economic news in the housing and stock markets, are pulling back from spending.
“Confidence is a very fragile commodity,” Quinlan said.
In past downturns, there remained the feeling that “nothing would keep people out of the mall,” Quinlan said.
That’s not true this time.
“Maybe consumers are rational after all,” Quinlan noted.
The result may be good, Quinlan said.
“I think we can stand to save a little more,” he said.
While the nation’s jobless rate is now about 6.5 percent, it may rise to 8 or 9 percent. But, Quinlan noted, it has been as high as 10 percent in past recessions.
“This is not the end of the world,” he said, adding that the country is not headed for another Great Depression.
While Quinlan expects unemployment to get worse over the next month, he pins his hopes on the fact that the country has a highly educated workforce.
Turning to the other Washington, Quinlan said one of his concerns is Barack Obama’s ability to control his own party.
Because of ongoing bi-partisan bitterness and the fact that Democrats have been out of power in the White House for eight years, “Democrats might run amok.” Obama is “really in a box,” Quinlan added, in that the “GOP wants to spend money, too.”
Quinlan offered one suggestion to help the country change course – a 5-cent to 10-cent tax on gasoline. That revenue, he said, should be split between the military and improvements to infrastructure.
With the right policies, Quinlan said, the country should be moving out of a recession by 2010 or 2011.
What many people don’t realize, Quinlan noted, is that the U.S. produces 20 percent of the goods in the world – the same percent as in 1980. The reason, he said, is that fewer workers are producing the same goods – an economic plus.
That has meant lost jobs, Quinlan said, but producing more goods with fewer people is called “productivity.”
Responding to a question about a possible bailout of the auto industry, Quinlan said it’s a “tough call” since the companies “made the stew they are in.”
Personally, he would favor a limited bailout. Specific companies have problems, he said, not the entire industry.