The national economy is “clearly showing signs of recovery,” Dennis Lockhart, president and CEO of the Federal Reserve Bank of Atlanta, said at a Macon event Thursday.
Lockhart, who was a guest of Macon State College School of Business to discuss current economy issues, said that while the nation’s economy is improving, the vital signs are mixed.
“Optimism is warranted but should be tempered by awareness that this is an economy substantially buttressed by a large number of temporary government support programs,” he said.
The economy is “technically in recovery when a contracting economy gives way to growth,” Lockhart said to a gathering of more than 400 people. “By some estimates, it will be the second half of 2010 before the 2007 levels of activity and national output are reached.”
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The key to recovery will be a turnaround in the housing market, which is improving as measured by sales volumes, prices and new home starts, he said. But new and existing home inventories remain high, “suggesting a weak residential construction outlook.” Sales are being supported by government programs, such as a first-time homebuyer tax credit, he said.
Increases in unemployment, fear of job losses and tighter consumer credit has contributed to pushing consumption down, especially for durable goods.
When Lockhart joined the Fed in 2007, the national unemployment rate stood at 4.5 percent. Currently, the national rate is 9.7 percent “and likely to rise from here before beginning to fall,” he said.
Since the economic crises began in 2007, estimates show that American households “saw $14 trillion dissipate, largely from stock market losses and house price deterioration through the first quarter of 2009,” he said. “This loss represents more than 20 percent of aggregate net worth.”
But about $2 trillion was recouped in the second quarter of 2009, he said.
“Jobs and employment almost always lag in a recovery,” Lockhart said in response to a question from an audience member who said he had lost his job. “It won’t be immediate.”
Lockhart said he didn’t expect to see employers beginning to call people back to work this quarter.
In light of several bank failures, especially in Georgia, Lockhart said the future of the banking industry is still fairly dim.
“I think some banks remain under severe stress,” with residential and commercial real estate exposure among the sources of that stress, he said. “I suspect we have not seen the last bank failure in the country, and I think it will take some time for the banking system to totally heal. In all likelihood there will be some consolidation and some changes in the structure of the banking system ... before it’s stabilized.”
Lockhart took office in March 2007 as the 14th president and CEO of the Federal Reserve Bank of Atlanta. In this role, he is responsible for all the bank’s activities, including monetary policy, bank supervision and regulation, and payment services. He also is chairman of the bank’s Management Committee. In addition, he serves on the Federal Reserve’s chief monetary policy body, the Federal Open Market Committee.
To contact writer Linda S. Morris, call 744-4223.