Nov. 14--The U.S. economy is coming out of a very deep hole.
"By my reckoning, we are in the fifth inning of recovery," economist Jim Glassman said Wednesday at an afternoon lecture at the University of Richmond's Robins School of Business.
"The economy is only halfway back to where we need to be," said Glassman, managing director and head economist for commercial banking at JPMorgan Chase & Co.
The recovery feels like it's slow. "It is slow because recoveries always feel this way," he said, adding that it takes years to recoup confidence.
For college students looking to graduate in the next couple of years, the scenario will be a lot different than it was for those who graduated in 2008, 2009, 2010 and 2011. "It's been brutal," Glassman said.
In other recessions, older people got pushed out of the workforce because they were more expensive and people coming out of college had good shots at getting jobs.
But that didn't happen this time because of the severity of the crisis. Companies wanted to hang on to people with skills and experience, he said.
Glassman pointed out that the U.S. economic collapse was triggered by craziness in the real estate markets, which drove house prices to unprecedented levels.
Problems here are felt in other parts of the world and vice versa. "The world has gotten smaller, so it matters what happens globally," he said.
"The U.S. is pulling out of this nightmare faster than (downturns) in Japan or Europe because it is more aggressive about cushioning the economy and getting things moving," he said. "If you correct things quickly, you get it behind you faster."
Although some states were hurt more than others by the real estate crisis, the country as a whole is moving in the same direction as far as the recovery, he said.
Economic data can be noisy and distracting, Glassman said. The best three indicators are the financial health of the business community, the equity markets and the jobless rates, he said.
Businesses are beginning to hire again and invest in capital equipment. Also, their profit margins are back to record highs, Glassman said.
The stock market is rising in response to that profitability. The Standard & Poor's 500 index hit another high on Wednesday. And the Dow Jones industrial average climbed about 0.5 percent for the day, also topping its previous high.
"I would have a hard time being that optimistic if I didn't see the equity markets responding."
If he were to look at one indicator to make a judgment about the economy, it would be unemployment benefits. Jobless claims are coming down, and layoffs are now back to normal, Glassman said.
"However, we still have 4 million people looking for jobs who need jobs." An additional 3 million to 4 million people have disappeared from the workforce.
Glassman assured his audience of students, faculty and others that the U.S. will never default on its debt.
And despite recent chaos involving the government shutdown and the debt ceiling, the real problem is not the federal deficit, he said, adding that the deficit has dropped from 10 percent of the gross domestic product to 4 percent.
"It's important to get back to the real debate, which is health care spending and entitlements," he said.
"You can have the government, even if it were at full employment, borrowing more than it's taking in."
Cutting spending and raising taxes will not solve the problem, he said. "It will drain the energy out of the economy. ... Our challenge is not a fiscal challenge, it's a health care challenge."
(c)2013 the Richmond Times-Dispatch (Richmond, Va.)
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Original headline: U.S. economy is 'halfway back,' JPMorgan Chase economist says
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