Economists using the ‘R’ word

By Martin Crutsinger

Associated Press

WASHINGTON — Massive airline layoffs. Empty hotels and restaurants. Wall Street’s biggest weekly point decline ever. The economic damage from the terrorist attacks has virtually guaranteed a recession this year, many economists said Friday.

The only questions remaining: How long and how deep?

"I think we will have a mild recession that will end sometime in the first three months of next year, but we really don’t know yet. Things are very uncertain and everybody is nervous," said David Wyss, chief economist at Standard &Poor’s in New York.

Two closely watched forecasting groups — the Blue Chip Economic Indicators and the National Association for Business Economics — surveyed economists in the wake of the Sept. 11 terrorist attacks. Both released surveys this week finding that an overwhelming majority of economists believe a recession is unavoidable.

The National Association for Business Economics survey, released Friday, found that 18 of its 21 forecasters believe the country is now in a recession.

Blue Chip Economic Indicators reported that the number of economists it surveyed who believe a recession has begun had jumped to 82 percent, up from 13 percent in early September.

In both surveys, the new pessimism was pegged to a belief that consumers — who account for two-thirds of economic activity — would cut back sharply on their spending in the wake of the terrorist attacks and rising job layoff announcements.

Some analysts said the National Bureau of Economic Research, the official arbiter of recessions in the United States, will end up dating the start of this downturn in May or June, based on when various monthly statistics started to turn down.

"The Sept. 11 reign of terror didn’t cause the recession, but it’s finally allowed the financial markets to recognize one," said Jeffrey Rubin, chief economist at CIBC, a New York investment bank, who predicted the U.S. economy will see an additional 600,000 layoffs in coming months.

Analysts said the plunge in stocks will further depress consumer spending as Americans watch their portfolios shrink.

Michael Evans, chief economist at American Economics Group, a private consulting firm, said he did not believe the economy would turn around until six months after the stock market finally starts to rebound.

Evans said he was looking for a relatively mild recession with an unemployment rate topping out at 6 percent.

In just the past 11 days, the airline industry has announced more than 100,000 layoffs and the disruption in air travel has quickly rippled through to hotels and other businesses that depend on tourism.

"People have a deer in the headlights look right now. They are not traveling. They are not going out to eat. They are not going to shopping malls," Wyss said.

The Conference Board released a new survey Friday that showed that 47 percent of consumers believe the country will sink into recession. Many analysts believe growth next year will be helped by billions of dollars in extra government spending for reconstruction and to boost security, but those increases won’t be enough to prevent a downturn.

But all economists cautioned their forecasts will be highly dependent on such unknowable factors as how the U.S. military campaign against the terrorists proceeds.

"In the pessimistic alternative, the economic damage from the attacks mounts and … anxiety rises as the war on terrorism drags on with increasing casualties," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.

However, he said under an optimistic scenario, the U.S. effort could meet with quick success by Thanksgiving and "with confidence soaring, the economy avoids a recession."

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

More in Herald Business Journal

Members of Gravitics' team and U.S. Rep. Rick Larsen stand in front of a mockup of a space module interior on Thursday, August 17, 2023 at Gravitics' Marysville facility. Left to right: Mark Tiner, government affairs representative; Jiral Shah, business development; U.S. Rep. Rick Larsen; Mike DeRosa, marketing; Scott Macklin, lead engineer. (Gravitics.)
Marysville startup prepares for space — the financial frontier

Gravitics is building space station module prototypes to one day house space travelers and researchers.

Orca Mobility designer Mike Lowell, left, and CEO Bill Messing at their office on Wednesday, Aug. 16, 2023 in Granite Falls, Washington. (Olivia Vanni / The Herald)
Could a Granite Falls startup’s three-wheeler revolutionize delivery?

Orca Mobility’s battery-powered, three-wheel truck is built on a motorcycle frame. Now, they aim to make it self-driving.

Catherine Robinweiler leads the class during a lab session at Edmonds College on April 29, 2021. (Kevin Clark / The Herald)
Grant aids apprenticeship program in Mukilteo and elsewhere

A $5.6 million U.S. Department of Labor grant will boost apprenticeships for special education teachers and nurses.

Peoples Bank is placing piggy banks with $30 around Washington starting Aug. 1.
(Peoples Bank)
Peoples Bank grant program seeks proposals from nonprofits

Peoples Bank offers up to $35,000 in Impact Grants aimed at helping communities. Applications due Sept. 15.

Workers build the first all-electric commuter plane, the Eviation Alice, at Eviation's plant on Wednesday, Sept. 8, 2021 in Arlington, Washington.  (Andy Bronson / The Herald)
Arlington’s Eviation selects Seattle firm to configure production plane

TLG Aerospace chosen to configure Eviation Aircraft’s all-electric commuter plane for mass production.

Jim Simpson leans on Blue Ray III, one of his designs, in his shop on Friday, August 25, 2023, in Clinton, Washington. (Ryan Berry / The Herald)
Whidbey Island master mechanic building dream car from “Speed Racer”

Jim Simpson, 68, of Clinton, is using his knowledge of sports cars to assemble his own Mach Five.

Inside the new Boeing 737 simulator at Simulation Flight in Mukilteo, Washington on Wednesday, Sept. 20, 2023. (Annie Barker / The Herald)
New Boeing 737 simulator takes ‘flight’ in Mukilteo

Pilots can test their flying skills or up their game at Simulation Flight in Mukilteo.

An Amazon worker transfers and organizes items at the new PAE2 Amazon Fulfillment Center on Thursday, Sept. 14, 2023, in Arlington, Washington. (Ryan Berry / The Herald)
Amazon cuts ribbon on colossal $355M fulfillment center in Arlington

At 2.8 million square feet, the facility is the largest of its kind in Washington. It can hold 40 million “units” of inventory.

A computer rendering of the North Creek Commerce Center industrial park in development at 18712 Bothell-Everett Highway. (Kidder Mathews)
Developer breaks ground on new Bothell industrial park

The North Creek Commerce Center on Bothell Everett Highway will provide warehouse and office space in three buildings.

Dan Bates / The Herald
Funko president, Brian Mariotti is excited about the growth that has led his company to need a 62,000 square foot facility in Lynnwood.
Photo Taken: 102312
Former Funko CEO resigns from the Everett company

Brian Mariotti resigned Sept. 1, six weeks after announcing he was taking a six-month sabbatical from the company.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Paper or plastic? Snohomish County may require businesses to take cash

County Council member Nate Nehring proposed an ordinance to ban cashless sales under $200. He hopes cities will follow suit.

A crowd begins to form before a large reception for the opening of Fisherman Jack’s at the Port of Everett on Wednesday, August 30, 2023, in Everett, Washington. (Ryan Berry / The Herald)
Seafood with a view: Fisherman Jack’s opens at Port of Everett

“The port is booming!” The new restaurant is the first to open on “restaurant row” at the port’s Waterfront Place.