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U.S. Chamber Economist Says Recovery Will Be Slow

The U.S. economy is a mixture of good and bad news, according to U.S. Chamber Chief Economist Marty Regalia.

The good news is that the economy is growing, and the country is coming out of the recession, Regalia said during the Chamber’s annual Labor Day briefing at its Washington, D.C., headquarters on September 3. The bad news is that the recovery will be long and drawn out.

Owing to a decline in consumer prices, the economic stimulus, and the bottoming out of the housing market, business owners and consumers have gotten through the worst, according to Regalia. But, “we’ll see a subpar recovery” because of weak personal consumption, virtually non-existent investment, and a neutral trade balance, he noted. “The reaction that this economy is showing to the economic downturn is just different from what we have come to expect,” said Regalia. “And because of that, we're going to see slightly different modifications in growth rates from what would normally be the case.”

Regalia predicted GDP growth of 2.5% to 3% in the third quarter and as high as 4% in the fourth quarter but warned that the impact of the stimulus will fade in early 2010, leading to a “backslide” in the recovery in the second half of next year.

The job market is perhaps the economy’s biggest challenge, Regalia said. Before hiring new workers, recovering businesses will seek to restore full time status to workers who were moved to part-time work during the downtown. Part-time workers are not reflected in unemployment figures.

Also not counted in the jobless rate are the unemployed who have stopped looking for work. As the economy rebounds, those workers will reenter the job market, causing the unemployment rate to rise. “We still have some bad news to go on the unemployment front,” Regalia said.

Since the beginning of the recession, the economy has lost 6.6 million jobs. To reach the pre-recession job numbers, Regalia said 12 million to 15 million net new jobs must be created—a task that could take as long as five years to accomplish.

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