We can all stop debating whether the economic recession that began in the third quarter of 1990 ever ended or whether it will turn into a "double dipper." That discussion, says Spencer F. Eccles, has become little more than a semantic exercise.
Speaking at First Security Corp.'s 24th annual economic symposium Tuesday morning at the Marriott Hotel, the chairman and chief executive of Utah's largest financial services company said that, since First Security's fiscal forecast a year ago, "It has become clearly evident that our warning was timely, and the administration, Congress and the Federal Reserve were late in recognizing the magnitude of this economic weakness."Eccles predicted the current "recessionary environment" will persist at least through the first half of 1992 but noted that, while the challenges are great, "I do believe there is a reasonable probability that the contractionary, cyclical pattern of the past six quarters can at least be stabilized, if not broken, this year."
Kelly K. Matthews, First Security's chief economist, was more upbeat in his discussion of Utah's performance during the national downturn and the state's prospects for the new year.
"Utah's economy recorded the best overall national growth in 1991, and while income and employment growth rates may narrow in 1992, the state's economy is expected to remain a top national performer," he said.
Matthews said improved optimism for the national economy should spur Utah consumers' confidence and spending thhis year as the state's strong labor force continues to attract new jobs.
In his remarks on the national and world scene, Eccles pointed to the upcoming presidential election, the disintegration of the Soviet Union and the fragile economic conditions in Japan and Germany as wild cards for the United States in 1992.
But Eccles saved his sharpest barbs for Congress:
"The very thought that the Senate and House will descend upon Washington, D.C., with the zealous intent of `fixing' the broken U.S. economy is perhaps the biggest nightmare of all."
Pointing to the aborted attempt late last year by the Senate to slap interest rate controls on credit cards after President Bush had mentioned such a possibility, Eccles termed the incident a disgrace.
"But it typifies the inept, shallow and politically motivated conduct of many who have been elected to set . . . economic policy for the nation. Stay tuned. There will be undoubtedly be much more to come."
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Key points of forecast
Here are some key points in First Security Corp.'s 1992 national economic forecast:
-The challenge for 1992 is to end the cycle of business contraction without worsening the structural imbalances that still exist.
-Improved corporate profits, reflecting reduced, costs may stop the wave of job losses and begin to restore consumer confidence.
-Even more so than in the past, financial rewards will be closely linked to productivity and efficiency. When the size of the pie is unchanged, cutting oneself a larger share requires quality and efficiency.
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First Security Corporation's 1992 Forecast
Predictions for Utah's economy:
-Personal income to increase 6.8 percent this year on the heels of a 7.2 percent gain in 1991.
-Nonfarm job gains at 18,000 down from 21,500 last year and 32,400 in 1990. Utah's '92 unemployment rate is expected to average 5.5 percent, up from 5.0 percent in `91 and 4.3 percent in `90.
-After rising a very strong 25 percent last year, single-family housing building permits are projected to reach 8,200 this year, a more modest 6 percent rise.
-Taxable retail sales are predicted to rise 5 percent this year, duplicating last year's increase. Auto sales should be up 5.5 percent, only partially offsetting last year's 10 percent drop in sales.
Predictions for the national economy:
-Real Gross Domestic Product in `92 should increase modestly witn an annual average gain of 1.2 percent. During the first half of the year, the current sluggish economy will likely persist but by the third quarter return to 203 percent growth - anemic but positive.
-Inflation, as measured by the consumer Price index, is expected to increase 2-3 percent, noticeably below 1991. Deflation, not inflation is the largest obstacle to economic prosperity.
-Unemployment will vary between 6.5 percent and 7.5 percent but the figures are misleading because unemployed who have discouraged and have stopped looking for jobs are not included in the labor force and thus mask the true extent of unemployment.
-National housing starts are expected to average 1.1 million to 1.3 million units, a meager output overall but some areas, such as the Intermountain West, are expected to show positive growth. Demand for mortgage loans should remain strong locally in light of low interest rates, new construction and refinancing.
-Auto sales are expected to range from 8.5 million to 9.0 million units, up slightly from last year.
-The Treasury Bill interest rate was at 3.8 percent at the end of 1991. First Security expects this rate is near the bottom, although it could drop another one-half percent before firming at midyear. Composite long bond yields were at 7.4 percent at year's end but could slip still lower in the near term. A trading range of 71/4 to 73/4 percent is projected for 1992.