Economic recovery still months away

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(Host) According to a new report, the Vermont economy will not show definite signs of recovery for at least another six months. The forecast says the recovery will be delayed because there’s very little new investment in the business community.

VPR’s Bob Kinzel reports.

(Kinzel) The new economic forecast was unveiled to Governor Jim Douglas and key lawmakers to help the group arrive at a consensus revenue projection for the new fiscal year.

Last January a similar forecast predicted the beginning of an economic recovery in Vermont. But this summer but Tom Kavet, the economist for the Legislature’s Joint Fiscal Committee, says the recovery is going to be delayed:

(Kavet) “The whole recovery has been pushed back a little bit that’s essentially what we’re looking at. Things are very, very mixed right now. We’re getting some signals that make it look like the economy’s doing okay on some fronts and on other fronts it looks disastrous and when you add it all up it’s kind of muddling along.”

(Kinzel) One of Kavet’s key concerns is the continuing loss of manufacturing jobs in the state. The decline started in January of 2001and hasn’t stopped:

(Kavet) “These are good high paying jobs. This is what’s been happening to one critical sector: it’s a precipitous decline but worst of all it hasn’t bottomed out. If it had bottomed out for a few months – even a quarter or something like that – I’d be much more willing to say, ‘Yeah, the forecast that everybody’s talking about the recovery coming is actually taking hold and I feel good about it.’ It hasn’t happened yet and because of that, we didn’t feel comfortable going out on a limb with a near term bounce back in the economy. There are a lot of things that are still uncertain and unknown.”

(Kinzel) Kavet is concerned that recent actions by the Federal Reserve Board have not stimulated the national economy. It’s a situation that could lead to deflation – an economic condition where prices are falling but consumers aren’t buying:

(Kavet) “The risk is that we get stuck in a kind of quagmire where we’re not really getting growth and the federal tools, monetary and fiscal, are not doing what their supposed to. And actually that sounds a lot like the last four or five months here. We’ve had cheap money, how much cheaper can it get? We’ve had lots of spending and we’re going to have more and it hasn’t lifted things. So we’re kind of at the end of the road with this and either it works and we’re out or we could be in a much worse situation.”

(Kinzel) Kavet notes that Vermont’s unemployment rate remains one of the lowest in the country primarily because of strong spending in the tourism industry. Without this out-of-state spending, Kavet says Vermont’s economy would be in much worse shape.

For Vermont Public Radio I’m Bob Kinzel in Montpelier.

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