By John Byczkowski
The Cincinnati Enquirer
Two years after the Sept. 11 terrorist attacks, businesses still have their hands in their pockets and the airlines are still scrambling to make money.
The multibillion-dollar effects of 9-11 on the nation are still debated by economists, and they're still getting in the way of seeing what's ahead.
A year ago, for instance, a panel of local economists set out to forecast the 2003 economy. They knew war with Iraq was coming, but they - and their brethren nationwide - underestimated just how businesses would clam up while waiting for the war to start.
They forecast an unemployment rate of 4.4 percent and job growth of 0.9 percent. But through July of this year, the local unemployment rate has floated around 5.1 percent, and job growth has been weaker, at 0.5 percent. Nationally, economists had pegged economic growth this year at 3 percent, but now expect it to be around 2.5 percent for the year.
"We underestimated how slow employers would be to hire additional employees," said George Vredeveld, a University of Cincinnati economist. "The fact that we've had virtually no job growth was a bit of a surprise. We were never very optimistic, but I think it surprised everyone."
This morning, that same panel of economists will unveil its local 2004 forecast for the Greater Cincinnati Partnership, an economic development group. The breakfast presentation begins at 8 a.m. at the Hilton Netherland Plaza hotel downtown.
Looking at 2004, "the biggest uncertainty is what happens in the Middle East and the threat of terrorism attacks in the United States," said Richard Stevie of Cinergy Corp., a member of the economic panel.
Without that, "all the signs in the economy point to a pretty good rebound," he said.
Nationally, economists expect growth accelerating to 3.9 percent in 2004, but only a slight decrease in unemployment, to 5.9 percent from 6.1 percent this year, according to a survey of 54 economists published Wednesday by the newsletter Blue Chip Economic Indicators.
Randell Moore, Blue Chip's publisher, said the unsteady pace of the job market is throwing some economists for a loop.
"It's really difficult when you look at employment, when you see it start to improve, then you'd see some downturns. We don't see a nice positive trend." The lack of job growth makes it harder to forecast other economic activity, such as consumer spending, he said.
Robert Genetski, a Chicago economic consultant, said businesses still have a hangover from Sept. 11, because they're spending more on security and backup systems.
Positives for the economy are tax cuts and the interest rate cuts by the Federal Reserve.
"The Fed is just pouring money into the economy right now," Genetski said.
Ken Mayland of ClearView Economics in Cleveland said the travel industry and the airlines still haven't recovered from Sept. 11. "It's a lingering impact, but it's not a stumbling block to a rebound," he said.
The tax cuts and increases in defense spending will drive growth into 2004. "2004 is a slam dunk. It's going to be a very good year, a year of above average growth," he said.
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