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Recession inevitable but not deep

WASHINGTON-The Dow Jones Industrial recorded record losses since it reopened the Monday following the terrorist attacks on the World Trade Center and the Pentagon. Airline companies are being forced to lay off approximately 100,000 people due to decreased demand. Can the U.S. economy recover from this staggering blow? According to...

By Sarah Snell Cooke | Updated on October 02, 2001

WASHINGTON-The Dow Jones Industrial recorded record losses since it reopened the Monday following the terrorist attacks on the World Trade Center and the Pentagon. Airline companies are being forced to lay off approximately 100,000 people due to decreased demand. Can the U.S. economy recover from this staggering blow? According to credit union economists, it will and it should not take much time either. While CUNA Economist Bill Hampel said, “There is a sense of malaise throughout the system,” the American economy is not down for the count. He admitted that it is very difficult to interpret data at this time because of the “tremendous volatility” in the markets, but added that his forecast has not changed a lot from before the incidents. NAFCU Economist Jeff Taylor agrees. His economic forecast is basically the same as before, but pushed back a couple of months. He partially credits the Federal Reserve’s quick actions to cut rates by 50 basis points before the stock markets even reopened with the somewhat rosy economic forecast. He explained, “.because of the fiscal stimulus, I think you’ll see the economy pick up pretty quickly early next year.” Both economists have changed their minds about a recession, which now seems inevitable. However, they say it should be shallow. Hampel said that credit unions are extremely well positioned to deal with this unexpected attack on the economy. He said that by late next year, credit unions’ capital asset ratio could drop to an average of 10%, still well above the required 6% to be considered adequately capitalized under Prompt Corrective Action. But, the more than 1% fall is a “significant drop,” he emphasized. The entire economic outcome will hinge on how the consumer reacts to the economic uncertainty, Hampel said. [email protected]

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