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Colorado economist: recession by end of '07

Joanne Kelley, Rocky Mountain News

Published September 12, 2006 at midnight

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Economist Tucker Hart Adams delivered another one of her signature gloomy annual forecasts Tuesday, this time predicting a recession would start by the end of 2007.

Adams, who spoke at a downtown breakfast for U.S. Bank customers, pegged the probability of an economic downturn at 75 percent and said the only question is "how hard the landing is going to be."

Among the possible factors that could trigger a slide:

-Foreign investors could "decide they’ve got enough U.S. debt" and look for alternative investments in other countries. Such a scenario would immediately push up long-term interest rates.

-Higher energy prices will work there way through the economy, not only pushing up gasoline prices, but utility bills and the price of all goods and services.

-Consumers will be forced to cut back on their spending. Given the persistent negative savings rate, they will either go further into debt or stop buying.

Adams said the lack of personal income growth has been a particularly worrisome trend. High rates of credit card debt also remain a problem. Despite the apparent current health of the economy, troublesome signs also include: slowing economic

growth, accelerating inflation, a softening housing market, among others.

While commercial construction should remain a bright spot, the residential building boom troubles her because the number of new homes being built outstrips demand. She predicted a collapse in housing prices, but said it would likely be less of a problem for Denver.

The housing "bubble" here is "not nearly as large as it is nationally,’ she said.

"However, the more severe the national recession, the worse the downturn will be in Colorado," she wrote in her forecast, available on www.coloradoeconomy.com.

Adams described the state of the economy as an unstable equilibrium. ‘If an equilibrium is stable, the result of the random shock is predictable; if it is unstable, the effect of the disturbance is unknown," she said.

She forecast "very little job growth" for Colorado in the year ahead, well below what’s needed to put new entrants into the labor force.

Comments

  • January 8, 2009

    10:10 a.m.

    Suggest removal

    Liamstuart writes:

    Today is January 8, 2009. Perhaps the Rocky would like to reassess its biasing phrase, "signature gloomy forecasts?" Dr. Adams, in my personal experience, has historically been more right that wrong for any number of years. Don't verbally shoot the messenger when the message isn't crafted by chambers of commerce.