Recovery forecast to continue to chug along at 'half-speed'

By Thomas Olson, PITTSBURGH TRIBUNE-REVIEW

The economy will not encounter a double-dip recession but will continue along a "half-speed" recovery in 2010, PNC Financial Services Group's chief economist said Thursday.

The same should be true for Western Pennsylvania, where unemployment will probably peak at nearly 9 percent before edging back to about 8 percent by the end of the year, said Stuart Hoffman.

"I see no reason why Pittsburgh should not recover, along with the U.S.," he told about 250 people at the Economic Club of Pittsburgh's annual forecast luncheon at the Omni William Penn Hotel, Downtown.

Unemployment in the seven-county Pittsburgh region was 7.9 percent in November, according to the most recent figures from the state Department of Labor & Industry.

Hoffman noted unemployment traditionally lags other economic indicators by a year or so. For instance, gross domestic product -- the total value of goods and services sold -- rose 2.2 percent in the third quarter, signaling a recovery.

He expects the United States will create about 2 million jobs this year, which would begin to recoup the 7.75 million lost since the recession began in December 2007.

Hoffman did not project how many jobs the Pittsburgh region might gain this year, but he expects new jobs will come in the education and medical fields, and possibly among "green" and energy-related jobs and maybe retail.

"Consumers are beginning to spend a little more freely because they have a little more confidence," he said. He also expects modest growth in this region for home sales, starts and remodeling.

Richard Hoey, chief economist for BNY Mellon Corp., provided a global forecast. He projects the world economy will grow at a rate of about 4 percent this year, including a 3 percent to 4 percent rate in the United States.

"We're going to have a world and U.S. economic recovery that's sustainable," said Hoey. "We're not going to have a double-dip recession."

Hoey said the recovery in the stock market that began in spring is "fully justified," based on the direction of and outlook for corporate profits.

He is pessimistic, however, about the federal government reversing growth in budget deficits. He envisions a "fiscal train wreck" in five to seven years, in which public borrowing to service that debt will crowd out the private sector's demand for capital.

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