KeyBank economist sees small chance of recession; slow growth more likely

The U.S. economy probably won’t slip into a recession despite recent slowdowns, according to an economic consultant for KeyBank Alaska.

"We put the chances of a recession at one in four, but it will feel like a recession," said Jeff Thredgold, who publishes a quarterly economic newsletter for KeyBank Alaska and is president of Thredgold Economic Associates of Salt Lake City.

Thredgold expects the U.S. economy will post a first quarter growth rate of 1 percent, contrary to two consecutive quarters of negative growth required for a recession, he said.

Thredgold spoke Feb. 14 to bank officials and others at the Anchorage Marriott Downtown.

Further, two factors can shore up the economy against a recession: the Federal Reserve Board’s ability to cut interest rates and the federal government’s ability to cut taxes, he said. The Fed already has trimmed interest rates this year, and Thredgold expects two more cuts through the second quarter.

"Economic expansions don’t die of old age. They die of disease. This economy has been pretty disease free," he said.

That health is indicated by fiscal surpluses, several years of economic growth and record low unemployment rates around the country, he noted.

The current national unemployment rate rose slightly to 4.2 percent, up from 4 percent for the two previous months, he said. Thredgold also sees low unemployment rates in regions, including 1 percent in Denver and 0.9 percent in Des Moines, Iowa.

Anchorage’s unemployment rate is about 4.1 percent, up from 3.9 percent last year, yet still in record low territory for the state’s history, Thredgold said.

In his winter 2001 newsletter for KeyBank Alaska, he reports the state unemployment rate will likely increase for 2001 and 2002. Also, the consultant believes 2001 job growth in the state will inch up from 2000, while new jobs created in Anchorage probably will decline from last year. In 2000 roughly 5,000 net new jobs were created, with almost 80 percent generated by the trade, transportation, government and business services sectors, the newsletter said.

A tight labor market should continue for the next several years, he said.

Wage statistics show a differing earning potential between college graduates and people who do not pursue a post high school education, he said. "In 1980 the average college graduate made 25 percent more than those without a degree. Now they make 90 percent more," he said.

Anyone who secures vocational or technical training after high school increases their earning by 15 percent to 20 percent over those people with only a high school degree, he said.

Inflation should be held in check by several factors, he said. Competition in many sectors should stave off inflation, Thredgold said. Another factor is bold consumers who hold the line on prices and will either negotiate retail prices, shop the Internet or find it at Wal-Mart, he said.

Thredgold listed critical industries of the future: technology, transportation, telecommunications, financial services, entertainment and biomedicine. "All are now dominated by the U.S.," Thredgold said.

Updated: 
03/03/2001 - 8:00pm

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