Economy
shows improvement, hope for students
By
Andrew Kaplan
Michigan Daily (U. Michigan)
ANN
ARBOR, Mich. (U-Wire) -- Many readers browsing
through recent newspapers consider the national
economy to be still in a recession. Journals
report that unemployment is at a 10-year
high -- about 6.5 percent -- with growth
averaging less than 3 percent since fiscal-year
end 2001.
But
technically, University of Michigan economists
say, the downturn ended November 2001.
The
economy will begin to shake off aftereffects
of the recession and gather speed over the
next few fiscal quarters, according to a
two-year economic forecast issued by the
University Research Seminar in Quantitative
Economics last month.
"Looking
ahead, we see more and more reason to believe
that the positives in the outlook are gaining
in force," the report states, adding
that low interest rates and income-tax cuts
have softened the blow of widespread joblessness
and staggering oil prices.
"Barring
further truly significant negative 'environmental
shocks'" -- such as terrorism, war
and corporate scandals -- "we expect
the positives in the outlook to carry the
day," the report states.
In
fact, production levels have exceeded pre-recession
rates, although high unemployment has obscured
signs of that recovery, University economists
said.
"In
terms of production of output, the economy
is way ahead of what it was at the start
of the recession," said Saul Hymans,
director of RSQE. "But what we haven't
recovered and continue to lose is employment."
Many
of the unemployed are students seeking their
first jobs. Over the last year, workers
between the ages of 20 and 24 have lost
more than 500,000 jobs, while workers aged
25 to 34 actually gained jobs, according
to the U.S. Department of Labor.
In
addition to positive predictions from economists,
current consumer sentiment and futures economic
expectations have improved significantly
since April, according to a University survey
of consumers released Friday.
"Consumers
exhibit a greater awareness of positive
economic developments in August than any
other time during the past five years,"
the survey states, referring to a consumer
expectations index that registered 20 percent
above levels in March 2003.
"'The
prevailing favorable views of consumers
about their future economic prospects will
support a robust pace of consumer spending
during the second half of 2003,'" said
Richard Curtin, director of Surveys of Consumers
in a written statement.
But
he added that only increased employment
could sustain long-term economic growth.
According
to the RSQE report, the unemployment rate
will fall below 5.25 percent by the end
of 2005, the Federal Reserve will raise
interest rates and economic growth will
reach 4.8 percent during the beginning of
2004.
"The
market's already anticipating some of that
stuff, so the question is, 'How much bad
news will there be?'" said Economics
Prof. Robert Barsky.
Barsky
added that a natural unemployment rate of
4 percent and growth levels of 3 percent
are necessary to maintain a healthy economy.
Despite
criticism aimed at the Bush Administration
that tax cuts increase an already massive
federal budget deficit, University economists
said those cuts are helpful tools for short-term
growth.
"At
the moment, tax cuts are probably helping,"
Hymans said, adding that such breaks allow
consumers to spend more of their income.
But
"in the long run, tax cuts contribute
to widening the deficit, and there are a
number of long-run problems that can occur,"
he said, referring to cutbacks in government
spending on public services, such as health
care and education, as the result of budget
shortfalls.
"It's
very hard to argue that (the tax cuts) are
not a bad idea," Barsky said.
|
