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January 03, 2002
Forecast for 2002: Higher Unemployment
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- More Americans will be out of work.
- Many of the nation's trading partners will be entering a recession.
- In spite of all of the above, this year will be better than last.
The economists foresee the nation climbing out of recession this year, according to the Monitor. Corporations, after all those layoffs, will see their profits increase. That should help the stock market, and the higher stock prices that result may give the consumer some solace and the chance to help spend the country back to prosperity.
"We'll be headed in the right direction. We'll be coming out the other side," said Don Straszheim, head of Straszheim Global Advisors in Westwood, Calif.
The timing for all of this is anybody's guess, according to the Monitor. Some of the economists interviewed by the newspaper think a recovery is already in progress, but others think it won't happen until late this summer.
Regardless, it's generally agreed the economy still faces these major challenges:
- The unemployment rate - now at 5.7 percent - will continue to rise. The consensus among those interviewed by the Monitor is for the unemployment rate to top out near 6.5 percent. Layoffs will continue as companies try to become profitable in the face of relatively weak demand.
"We track downsizing announcements, and we're still seeing heavy planned cuts," says John Challenger of the Chicago outplacement firm Challenger, Gray & Christmas.
The worst-hit areas, he says, are in manufacturing - automotive suppliers, steel companies, and chemical producers. But he says more layoffs are coming up in telecommunications, and perhaps in retailing.
Yet there is another side to this jobless picture: With corporate America on a "just on time" manufacturing schedule, companies will be recalling workers to fill orders when the upturn begins.
- A deteriorating global economy. European economies are running a few months behind the U.S., which means most are approaching a recession. And there's lots of trouble in Southeast Asia and Latin America, specifically Argentina.
- The country's debt, now at its highest level since the late 1980s, will keep consumers from becoming big spenders again. "We are so debt-ridden that spending will have to be cut back," says Asha Bangalore, an economist with Northern Trust Co. in Chicago.
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