Wednesday, January 16, 2002

N. Ky. may hit a bump in growth

Unemployment, inflation could rise, economist says

By Amy Higgins
The Cincinnati Enquirer

        Despite predictions of the recession ending, 2002 still might be a rough year for the Northern Kentucky economy.

        “The forecast is not overly optimistic,” economist Tom Zinn told the Northern Kentucky Chamber of Commerce Tuesday.

        For the first time in 18 years, jobs in Northern Kentucky grew slower than the national pace in 2000. Then in 2001, the national economic slowdown — along with Cincinnati riots and a Comair pilots strike — “kicked around” the Northern Kentucky economy, Mr. Zinn, the chamber's staff economist, said at the chamber's Egg 'n Issues meeting.

        He said the area had been cruising at 100 miles an hour — only to hit a 45 mph zone. Though the economy was still moving forward, it felt like a standstill.

        The slowdown started in June 2000, when industrial production in the region peaked. The drop-off in demand then trickled down to other Northern Kentucky businesses. Still, unemployment in Northern Kentucky was only 3.6 percent in October, while nationally it was 5.4 percent.

        Unemployment could rise to 4.5 percent this year in Northern Kentucky and 6.0 percent nationally, Mr. Zinn said. Inflation could kick in at a higher rate than the national level, 2 percent compared with 1.9 percent nationally.

        Strong economic growth likely won't start again until 2003.

        “Nobody's going to come roaring back, but I think that manufacturing's worst days are behind it,” said Martin Regalia, chief economist for the U.S. Chamber of Commerce, who also spoke at Tuesday's breakfast meeting.

        Mr. Regalia said the national economy has been held up by consumer spending, which makes up two-thirds of the national output. Benefits of the 11 interest rate cuts are starting to be seen, he said, adding that the Federal Reserve might make one more cut. The Fed will next meet Jan. 29-30.

        But, mindful of inflation, the Fed also will be quick to raise rates again once recovery is assured in the summer or fall.

        “They'll be quick to pull in the opposite direction,” Mr. Regalia said.


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