The economy, which has been weighing heavily on the hearts of the unemployed, the “1 percent” and everyone in between, is finally on a moderate rebound, according to Cal State Fullerton’s 2013 economic forecast released Thursday.
The report outlines how the national, Southern California and Orange County economies are doing and how they will behave in the next fiscal year.
“This is our forecast: the basic message from what is happening in the economy right now, in the short-term, in the cyclical factor, is that our economy is going to grow at a moderate rate,” said Anil Puri, Ph.D., dean of the College of Business and Economics at CSUF.
Consumer confidence, an economic indicator based on buying from regular consumers, is what is key to an ultimate recovery, said Andrew Cecere, U.S. Bancorp (U.S. Bank) chief financial officer and vice chairman.
Additionally, he attributed high unemployment to a lack of consumer confidence in the stumbling economy and uncertainty of the outcome of the Nov. 6 election, which will determine the direction for interest rates and regulatory taxation for businesses and consumers alike.
“I really think we’re in a very good position from an economic standpoint,” said Cecere. “I think there are a lot of positives, but I think the only thing that’s very negative is certainty.”
Cecere said domestic banks have about $1.4 trillion sitting in the Federal Reserve and are ready to lend to consumers at record-low interest rates.
“We want to make loans,” Cecere said about those looking to buy homes. In a joke, he said he advised his 16-year-old daughter to look to buy a house now because interest rates for home loans are under 5 percent.
Moreover, Cecere said, banks are “stronger than ever,” even with intensified federal regulations following the stock market downturn a few years ago that they have complied with. He also said banks have increased their capital and liquidity, or cash on-hand.
Puri, who gave the keynote address to the some 700 people in attendance at the economic forecast event, opened his address with gross domestic product (GDP) numbers that he said are “well-above pre-recession levels,” but stuck in neutral growth.
But he said that total GDP at this point is still lower than any other recovery in U.S. history. In a graph, he compared GDP numbers of other recessions the U.S. has experienced and showed the current recession comeback is lower than any other.
The last slump was in 2001, and three years later, real GDP rose almost 9 percent in recovery. In the same way, three years after the last nosedive in 2009, real GDP only inched 6.7 percent, the lowest of all recent recoveries.
He said although the economy is in an uptick, consumers are showing “signs of stress” due to unemployment and to what Cecere said about consumer confidence and certainty.
“I think uncertainty about not only the domestic economy and economic policies but also factor what is taking place in Europe, China and other places,” said Puri.
Puri made a point that the U.S. has been depending on exports more than it has in the past and as a result, it has gone up, but “growth in world trade has declined substantially,” he said.
Puri said that in the current political climate, people are getting mixed messages about the condition of the global economy.
“What matters is how the economy is doing. The only percent that matters is the rate at which the economy is going to grow,” Puri said. “And we believe we are living in a 2 percent economy. It’s not great, we can do better potentially, the maximum rate the U.S. economy can grow is at least 3 percent if not higher, but we expect at about 2 percent right now. Anything below that is a cause of concern.”
In the middle of his presentation, Puri invited Mira Farka, Ph.D., the co-director of the Institute for Economic and Environmental Studies and associate professor of economics at CSUF, to speak more in-depth about the job market and labor outlook for 2013.
Farka said labor participation is down 2.2 percent while disability and long-term unemployment are at very high levels.
Farka said the Federal Reserve is not equipped with the proper tools to aid in the recovery completely. She also said that it cannot properly address the housing market or credit standards that direct economic standards.
Farka noted that it is unlikely that the release of the most recent third-quarter earnings for businesses last month will “solve all the problems of the economy” but help a little with the housing market.
“I think we are at the cusp of an energy revolution that could turn the U.S. into the biggest oil and natural gas exporter over this decade,” she said. “I think we can address our problems, our budgetary problems, our public debt issues easily with smart and well-designed tax reform.”
Farka ended on an inspirational note by sharing the Chinese phrase for “crisis,” which translates into “danger” and “opportunity.”
CSUF President Mildred García, who gave the opening address, said students should be confident that their degree will help them get a job after they graduate. She said people who have a college degree are much more likely to find work than those who do not and that students should be assured that their chances are better.
“New jobs are being created, but there’s still a high level of unemployment,” Cecere said. “It’s going to take a while to get back to what I would call a ‘normal level of unemployment,’ but it’s on the uptick.”
In the same way, Cecere said that students should have patienc
e and not lose confidence in the investment they have made in attaining their degree.
“I think things will gradually improve, so don’t lose your confidence and your ability to do that because you’re willing to do that and that’s an investment in yourself,” he said.