The economy isn’t headed back into a recession any time soon, but the U.S. should expect slow growth over the next 18 months, Regions Bank’s chief economist said Wednesday.
Bob Allsbrook, speaking to reporters on a conference call, reiterated his view that the damage wrought by the financial crisis would lead consumers and businesses to save more and borrow less, cutting the spending that has fueled economic growth in recent decades.
He also said, in an interview after the conference call, that he was concerned it would take a long time for tourists to return to the Gulf Coast, because media coverage of the oil spill has “entrenched” fear in their minds.
“It’s going to take years to get the American public to believe that it’s OK to go there to go fishing and sit on the beach,” he said. “There is a tremendous fear nationally that the water isn’t safe.”
Allsbrook has predicted a return to thrift since early in the recession, with consumers saving more and companies piling up cash. He predicted the consumer savings rate, which has spiked to 6 percent, will range even higher in coming years.
“The nature of those changes is such that I believe it will cause below-average growth for many years to come,” Allsbrook said. He said he expected the U.S. to average 1.5 percent growth, an anemic pace compared to the 3 percent that has been considered normal.
He said that a widely noted summer slowdown stems from a decrease in federal stimulus spending, and the end to an industrial production boost created when companies had to refill depleted inventories.
That slow growth means joblessness is likely to remain mired above 9 percent through 2011, Allsbrook said, predicting it could even recross the 10 percent barrier as discouraged workers begin looking for jobs again.
“The job engine needs help,” he said. “Everything else is dependent on that, particularly consumer confidence.”
Allsbrook acknowledged he was caught off guard by a U.S. Bureau of Labor Statistics report last week that indicated Alabama saw the nation’s steepest percentage drop in unemployment over the past year.
The BLS said Alabama’s jobless rate fell to 9.2 percent last month, down 1.4 percentage points over 12 months. A separate BLS report released Wednesday said that Birmingham had the largest jobless rate decrease among large metros over the past year, a 1.6 point drop.
Mobile’s 1.2 percentage point drop ranked No. 32 among all U.S. metros, the report said.
“I don’t know where those strengths reflected in that report are. I’m still scratching my head over that,” Allsbrook said.
