Double-dip recession unlikely, economist tells Richmond group

The numbers this summer likely will show economic growth is slowing. The pundits likely will start muttering about a double-dip recession.

But economist Mark P. Vitner, while admitting economists' definitions of recession seem odd to the rest of the world, thinks you ought to ignore the pundits, at least when it comes to a double dip — the catchphrase for another slump hard on the heels of the historic decline that technically ended last year.

On the other hand, the odds that people will start talking about a double dip says something else important about the state of the economy: It is going to be quite a while before employment gets back to where it was before the recession started, Vitner, Wells Fargo Securities' senior econ-

omist, told the Richmond Association of Business Economists yesterday.

Vitner has tended to be more pessimistic than most economists in recent years — though two of the heaviest hitters, Nobel Prize winners Paul Krugman and Joseph Stiglitz, are warning of the double dip that Vitner brushes off.

But Vitner's views make more sense to many economists.

"We've gone through a really, really rough patch," said David A. Brat, chairman of the economics department at Randolph-Macon College in Ashland.

"The amazing thing is that the economy is as resilient as it is."

The big numbers that most economists follow — gross domestic product, or the total value of goods and services produced in the country — likely will slip from a 5.9 percent gain in the fourth quarter of last year to 3.4 percent in the current quarter to about 2 percent in the second and third quarter of 2010, Vitner said.

Vitner likes to look at a different set of numbers. By starting with GDP, but taking out inventories and adding in imports, he calculates a statistic he thinks is a rough proxy for demand — that is, how much consumers and businesses are buying.

That makes the fourth-quarter figure look less bullish and paints a picture of slow and steady growth instead, he said.

It won't necessarily feel that great, he said.

The huge number of people affected by job losses — Vitner estimates roughly one in five working Americans during the past year — have left many people in deep jams over credit and bills.

And still-high unemployment rates combined with a slowdown in growth may lead many to overreact and talk about a double dip, he said.

But the big thing that shrinks economies — businesses cutting back on staff, as well as purchases of material and investments — isn't likely this year, he said.

"They have cut pretty much everything they can cut," Vitner said.

"Growth will slow, but the big jump [in GDP] earlier came from inventories," said Christine Chmura, chief economist at Richmond-based Chmura Economics and Analytics.

Toward the end of last year, businesses ramped up production lines to replenish their stockpiles of goods to sell, and that accounted for a large part of the 5.9 percent growth rate.

"I think most businesses understand that growth will come down and aren't going to misinterpret that," she said.

Vitner said he knows economists sound peculiar to the rest of the nation when they talk about recession and recovery.

"It's like, if you fall into an open manhole, when you hit the bottom, an economist would say the recession is over," Vitner said.

"Everybody else says it is when you get out of the hole."

Contact David Ress at (804) 649- 6051 or dress @timesdispatch.com.