Of course it’s a recession

If anyone was hoping to hear good news at the Atlanta Rotary Club's lunch today, economist Don Ratajczak quickly changed that thought.

Ratajczak, former director of Georgia State University's Economic Forecasting Center who currently serves as a consultant, did not hold any punches.

"We are a nation that's troubled, and we are in a world that's in panic," Ratajczak said. And he dispelled any doubts about whether we are in a recession. "Of course it's a recession."

As evidence, Ratajczak pointed to the fact that there's been a loss of jobs every month for most of the year. He expects that when the new numbers are reported in November, another 200,000 jobs will have been lost. And that could increase to 300,000 a month early next year.

The real issue is whether the nation will be able steer its way out of the recession without entering a depression. And Ratajczak wouldn't make any guarantees.

Several actions will need to occur including regulating the unregulated parts of the financial community.

"We now need to regulate activities, not institutions," he said. "We need to regulate mortgages, not banks."

Ratajczak's forecast was that corporate profit would be down 20 percent in 2009. He expects companies to reduce capital expenditures, and he expects further contraction in the market -- minus 3 percent in the fourth quarter; about the same in the first quarter and then a negative 1 percent in the second quarter of 2009.

The biggest question of whether the United States will be able to avert a depression is one of confidence.

"We have got to rebuild that confidence," he said predicting that the Christmas season will be rather dismal for retailers this year.

As to the presidential election, Ratajczak said he would like to hear more direction from both candidates about how they would deal with the economy. He criticized U.S. Sen. Barack Obama for using words like "sharing the wealth when wealth is imploding."

But before letting people think that he is supporting U.S. Sen. John McCain, Ratajczak said of Obama: "He's more elegant than the other guy."

When asked about unemployment in Georgia, Ratajczak said his forecast shows it could reach 8.5 percent. He also predicted that the Federal Reserve Bank will cut interest rates again this year and that inflation will be only about 2 percent next year.

In closing, Ratajczak said: "I'm longterm bullish on banks. I just don't know which banks to be bullish on."

From: http://www.bizjournals.com/atlanta/stories/2008/10/27/daily16.html?f=et50&ana=e_du