SOUTH BEND - A Business Outlook Panel of economic experts at Indiana University South Bend on Friday predicted sluggish growth in 2012, with a bright-side note that threats of a double-dip recession have receded.
“For the last couple of years, it seems like we have been treading water and the water is not exactly calm,” said Timothy Slaper, director of economic analysis at the Indiana Business Resource Center at Indiana University’s Kelley School of Business.
“We have made slight progress, but we haven’t done all that well. Generally speaking, we’re going to be continuing to tread water.
“In a sense we are making two steps backwards and one step forward.”
Since the end of federal stimulus programs, Indiana has shed some 30,000 government jobs while adding 16,000 private-sector jobs, said Slaper, who expects the state will add 40,000 jobs next year and unemployment will drift down about a point, to 8 percent.
By itself, Michiana is well-positioned for recovery, said Lane David, an assistant professor of economics at IUSB, with projected increases in employment and income among the highest in the state during the next five years.
“The Michiana area has a huge pool of very creative and determined entrepreneurs,” David said. “Unfortunately, most of the factors that my colleagues alluded to that are going to affect what happens here are external concerns.
“There are so many things that could go wrong right now.”
Gas price spikes flowing from Middle East unrest could damage the recovering recreational vehicle industry. Looming federal health care changes could affect the industry that is the South Bend area’s top employer.
Ellie Mafi-Kreft, a clinical assistant professor of business, economics and public policy at the Kelley School of Business, said interruptions to the supply chain stemming from Japan’s natural disaster, soaring gas prices early this year because of Middle East turmoil and European financial uncertainty weakened the 2011 economy.
“The world is highly interconnected,” she said. “The economic health of the rest of the world, especially our trading partners, matters.”
She said the global economy likely will expand at about 4 percent next year, like this year, led by emerging economies such as China with 9 percent. The U.S. economy should grow at 2.5 percent to 3 percent, and unemployment should fall to 8.4 percent as 2 million jobs are created. Housing prices, however, will not rebound until at least 2013.
“The growth is continuing to be subpar for a recovery, especially when we consider the depth of the recession we recently experienced,” Mafi-Kreft said. “Most of us do not have very optimistic comments about the economy in 2012, unfortunately; but we do not have very bad news. We do not see a recession for 2012.”
The slow recovery and high public and private debt in the United States mean difficulty in financial markets, even though the stock market and gross domestic product are higher than expected, said Robert Neal, an associate professor of finance at the Kelley School of Business at IU Indianapolis.
“Our economy faces some serious headwinds and these headwinds are going to hurt our investment returns,” he said. “We were poor stewards of our national wealth. It puts us at a competitive disadvantage in the marketplace.”
Although interest rates are low, earnings are up and price-earnings ratios are positive, Neal urged caution in investments, with less dependence on stocks, protection against potential increases in inflation and minimal exposure to European problems. He also recommended home refinancing as 30-year rates are below 4 percent.
The panel was sponsored by Teachers Credit Union, promoted by the Chamber of Commerce of St. Joseph County and moderated by Rob Ducoffe, dean of the School of Business and Economics at IUSB.