Q&A with economist Mark Zandi
Chief economist at Moody's Analytics and cofounder of Economy.com Mark Zandi, at a August 25 Monitor breakfast, discussed the housing market, the odds of the economy slipping back into recession, and what the Obama administration could do to help the economy in the near term.
Economic expert Mark Zandi is chief economist of Moody's Analytics and cofounder of Economy.com. The Wall Street Journal called him 'the de facto chief economist to Congress.' He was the guest speaker at the Aug. 25 Monitor breakfast in Washington, D.C. Odds of the economy slipping back into recession:Skip to next paragraph
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"I don't think we will double dip, but it will be a close call. I put the odds at going back into recession in the next six to 12 months at 1 in 3…. If you had asked me eight to 12 weeks ago, I would have said 1 in 5."
The jobs outlook:
"In the very near term, the job market is weakening.... The unemployment rate is going to drift higher. If it is 10 percent come Election Day, I am not sure I would be surprised.... I do think we are going to get those 8 million jobs [the economy has lost] back, [but] certainly not next year. It will probably take five years to get them back."
Prospects for the housing market:
"The housing market is double dipping – sales obviously, construction, and I do think house prices will fall further.... If I had to put a number on it ... it is [a] 5 percent decline, further decline, in national house prices.... They are down 30 percent to date."
"I don't agree. I think we would be in a measurably worse place if not for the stimulus.... We would have 2-1/2 [million] to 3 million fewer jobs today than we actually have.... So instead of a 9.5 percent unemployment rate, we would have an 11.5 percent unemployment rate. So I think that is just wrong: The stimulus has been very helpful. It certainly has not helped as much as anyone would like."
What the Obama administration could do to help the economy in the near term:
"Given the political environment, I think it is very difficult to envisage any significant kind of policy response to the current economic problem in the near term. In the next six months, I don't think there is much that can be done to significantly affect the economy. Perhaps even as long as the next year it is going to be very difficult."
Tax policy and the need for clarity:
"Congress and the administration should come to terms on the tax cuts.... Uncertainty with regard to the tax code is a problem, and I would nail that down."
Outlook for the US economy:
"I am much more optimistic about the economy after we get through the next six to 12 months.... It will be a different economy.... We are not going to be powered by consumer spending, which has been the major source of growth for the past 25 to 30 years.... I do think that slack will be made up for by selling more of what we produce to the rest of the world, particularly to emerging economies, particularly to places like China, Brazil, India, [and] Russia."