Recovery fragile, economist warns

By Owen Boss

Staff Writer

NORTHAMPTON - The recession may be over, but until the federal government gets the nationwide unemployment rate under control, it's possible that the gradual economic recovery could stall out or even reverse itself.

This was the cautiously optimistic message delivered to more than 200 area businessmen and women Thursday morning at Hotel Northampton in a presentation titled "The Economy in 2010: Continued Recovery or a Backward Slide." The hourlong seminar was sponsored by Florence Savings Bank and led by economist and college professor Edmund J. Seifried.

For the third year in a row, Seifried, who teaches economics at Lafayette College and serves as dean at both the Virginia and West Virginia Banking Schools, revisited the factors that led to a nationwide economic collapse from 2007 to 2009 and compared figures from that period to today in an effort to give local businesses insight into the state of the economy.

"We are officially in a recovery - the recession is over. But there is the threat that we could lose steam, and the biggest threat to that is unemployment," Seifried said. "We have 14.5 million people unemployed and half of those people have been unemployed for 27 months or longer. When you combine that with the number of people cutting back on spending, it could end up being several years before we see unemployment drop to where it was before the recession."

Although the figures included in Seifried's report reflected the recovery on a national level, he mentioned that in many respects Massachusetts' economy is ahead of the curve - a fact he attributed to the state's abundance of colleges and hospitals.

"Massachusetts has built itself on these secure industries that are constantly growing and are always in demand, and that has put the state in a good position to rebound quickly," Seifried said.

"The result of having these industries is that the unemployment rate in Massachusetts is always below the national average," he said. "However, people's ability to pay for those services is dependent on the state of the nationwide economy."

As the recovery continues, Seifried argued, the federal government should consider encouraging employers to reduce their workers' hours rather than laying them off - an approach taken by several European countries to rejuvenate their economies after the collapse.

"These European nations realized that it is better to keep people working, even at reduced hours, rather than cut them loose," he said. "When you cut people loose it affects them psychologically and has the same kind of negative impact on their friends, relatives and neighbors."

Owen Boss can be a reached at oboss@gazettenet.com.