SAN DIMAS, Calif. - Two-thirds of respondents to a poll conducted by the Credit Union Journal now believe the U.S. economy is in a recession.
The poll, conducted at www.cujournal.com, found another 16% believe the economy may not be in a recession now, but will slide into one this year. Another 16% of respondents indicated they believe the economy will escape such a downturn. The findings don’t surprise some analysts.
“These are interesting questions, and interesting results,” said Dwight Johnson, VP/economic and market research for Western Corporate FCU here. “I am just somewhat surprised because credit unions have tended to be on the optimistic side. But I don’t disagree at all. I think we are in a recession.”
It’s a sentiment shared by David Colby, chief economist for CUNA Mutual in Madison, Wis.
“Am I surprised? Absolutely not,” he said. “I totally agree. However, a recession is just a label. But let’s slap a label on it. Let’s call it a recession. I think there are enough areas of the country that have felt job loss. I’m going to call it a recession. We’re in an economic downturn, a recession–call it what you want.”
For Brian Turner, manager, advisory services for Southwest Corporate Investment Services, the “interesting part of the question deals with the word ‘recession.’ ”
“To some, no longer is a recession two consecutive quarters of negative growth. They correlate it more to anytime there is a slowdown in the growth,” he said. “In other words, a slowdown is when your neighbor loses his job. A recession is when you lose yours.”
Eastern Financial Florida CU SVP Gary Lanier said he would have opted for, “the U.S. will avoid a recession.” “There are a number of issues impact our economy–housing, cost of goods, oil prices–but the world hasn’t come to an end as some in the media would want you to believe. We will absolutely see a slowdown, but not a recession–a recession is defined to be a period of two quarters of negative GDP growth.”
Lanier said the largest issues impacting the poll answers are the decrease in home values, depreciation in the stock market, and prices at the pump and the grocery store. “It’s not a fun time, but if we step back and look at how much our houses and 401(k)s appreciated over the past five years, and remember that we still pay a lot less per gallon than those in Europe, I don’t feel so bad.”
Dr. Tun Wai, NAFCU’s chief economist, was also not surprised by the results, even though he would have voted for “The U.S. will enter a recession.”
“When you’re asking for people’s viewpoints, you’re asking for their feelings,” he said. “But the definition of a recession is two quarters of negative GDP growth, and we haven’t gotten that yet.”
According to a study published by Duke University, which surveyed 475 CFOs at U.S. companies, the U.S. economy is in a “prolonged contraction that will not dissipate until next year.”
In the survey, more than half of the CFOs said “the world’s biggest economy is already in a recession,” according to the first-quarter Duke University/CFO Magazine Business Outlook index.
Colby said it’s a “tough time” for the U.S. “Post 9/11–we’re below that,” he said. “Katrina, Rita–we’re below that.” The rise in gas prices, he added, may hurt retailers, he noted. “Shoppers may skip a trip the mall altogether,” he said. “I think consumers are being forced into a shell. We haven’t seen huge behavioral changes, but it’s going to happen.”
Johnson agreed, noting “we’re seeing an alarming amount of people who can’t pay their bills, which in my eyes is the definition of a recession.”
Turner said there is a 50% chance that the U.S. will experience at least quarter of negative growth in 2008, “and 40/60 that we will have two consecutive quarters of contraction.”
“The nation’s economy is very much diverse geographically,” Turner noted. “That separation traditionally runs between the Coastal and Upper-Midwestern areas and the rest of the country. Over the past two decades, the former has seen home valuations appreciate at a rate equal to at least 10 times the rate of inflation. They have a higher percentage of service-based employment, and as a result much higher wagers and labor costs.”
Turner said the U.S. is seeing the largest impact from the latest economic slowdown across the West Coast, New England, Florida, Michigan and Ohio. “The rest of the country – still not immune from the cyclical downturn – is being impacted far less due to its diverse industry, more modest incomes and reasonable home values,” he said.
CU View On Economy
Your Economic Forecast For The U.S. Is:
Short-lived slowdown, not a recession 16%
Recession of limited duration 16%
Recession will last remainder of 2008 66%
For more information
www.cunamutual.com
www.wescorp.org
www.swcorp.org
www.effcu.org
www.nafcu.org
