Tuesday, October 26, 2010
The economy is improving, albeit at a disappointingly lethargic pace, according to the chief economist of the U.S. Chamber of Commerce.
Martin Regalia offered that assessment at the annual University of West Georgia Economic Forecast Breakfast on Tuesday.
"The good news is we're growing again. The problem is we're not growing fast enough," he said.
Regalia said the housing and job markets are the two weakest segments of the economy and that while there might be a hint of improvement in housing, unemployment is likely to remain painfully high.
"The unemployment rate is 9.6 percent and I think it is going to go up before it goes down," he said.
After sustaining millions of job losses, the economy has been gradually adding jobs, but not enough to make much of a dent in the unemployment rate.
The private sector needs to add about 300,000 jobs a month over an extended period to come close to replacing the ones that went away.
"You've got a long time until you replace all the lost jobs," Regalia said.
Most troubling is the number of people who are unemployed for long periods of time, Regalia said, because their skills can erode, making it even more difficult for them to find work when a recovery takes hold.
"What we are creating is a chronically unemployed segment of society," he said.
Many of those people have effectively stopped looking for jobs, and are not counted in the jobless rate figures.
The unemployment rate also does not account for the underemployed - people who are working part time but want to work full time.
In housing, recent government and banking industry efforts to slow or stop the rate of foreclosures might be good for those who are having trouble paying their mortgages, but ultimately are damaging to the financial system, Regalia said.
By blocking foreclosures, the process of getting those houses back on the market for others to purchase is delayed, which ultimately hurts sales, he said.
But he also acknowledged that the sale market is currently flooded with too much inventory.
Improving the real estate market is essential to reviving the health of the economy, Regalia said, because much of people's financial viability is tied to their home.
"The real key to getting [lost wealth] back is the housing market," he said. "We're not seeing the kind of wealth or income growth that would drive the economy."
The chamber has been politically active in the run-up to next week's elections, advocating for policies that it believes would boost economic growth.
As such, Regalia expressed support for repealing the recently passed financial reform law, repealing the health care overhaul and extending the tax cuts that are set to expire at the end of the year.
Those moves, he contended, would provide better visibility for businesses about where conditions are headed.
"There's a great degree of uncertainty and that's what is paralyzing the economy," he said.