National economy on approach to soft landing

So says A.G. Edwards Chief Economist Gary Thayer, who spoke with a group of business leaders and investors on Nov. 9 at Missouri Southern State University in Joplin.

Thayer, asked to give his assessment of the U.S. economy and his forecast for 2008, told the gathered crowd that the country is currently going through a period where the “markets are very volatile.”

“There are a lot of things that people are very worried about right now,” Thayer said. “People see somebody else doing something, and they pile on and the market gets moving in a certain direction.”

Thayer said despite the volatile market, the United States sits in a “pretty good situation historically.” Thayer said the country continues to experience low unemployment, moderate inflation, and the Federal Reserve continues to cut interest rates to help address the housing lending problems throughout the country.

“The plane has come down, but it’s had a soft landing,” Thayer said. “That’s what many have been hoping for.”

Brad Kleindl, dean of MSSU’s Robert W. Plaster School of Business, said Thayer also had the opportunity to speak to students earlier that morning and that his comments were both insightful and instructional.

Thayer joined A.G. Edwards in 1986 as a foreign currency, energy and interest rate futures analyst. As chief economist, he helps forecast economic growth, interest rates, exchange rates and stock market activity, offering analysis and economic direction to the firm’s retail and institutional financial consultants as well as its corporate and public finance personnel.

Keith George, a representative with American Funds, attended the Nov. 9 event. George said the lull in today’s market doesn’t indicate a drop in influence by the United States among the rest of the world and pointed out that the U.S. economy provides about 28 percent of the world’s wealth – with $25 billion alone spent on venture capital in 2006.

“That’s amazing,” George said. “Seven of the top 10 global brands are U.S. Certainly the economy is changing – the world is becoming a flatter place – but the U.S. economy is doing well.”

Thayer explained that the U.S. economy has done well in rebounding from the recession that occurred post-Sept. 11, 2001. He said easy credit during that time period boosted housing and that central banks drained their excess liquidity, causing the problems that are now surfacing. He said the main problem facing the U.S. economy right now has to do with housing.

“We’re not out of the woods yet,” he said. “And it’s probably going to get worse next year.”

Thayer said the global economy is likely to slow in 2008 as well, though inflation will likely recede. He said the risk of a recession, though slightly more increased now than earlier in the year, probably won’t happen in 2008.

“The economy may rebound late in 2008, if housing stabilizes and the foreign economy remains strong,” he said. “The most likely scenario going forward is still for growth. It’ll be slow growth until housing bottoms out, and the Federal Reserve will cut interest rates a few more times, but I think the housing market will stabilize, and this is not a period that is insurmountable.”

This story first ran in the Nov. 19 issue of Joplin Tri-State Business, SBJ’s sister publication.