UMB economist lays out three options for 2010

William Greiner has a lot to say about the state of the economy. And believe it or not, it isn’t all bad.

Greiner, chief investment officer with Kansas City-based UMB Bank, discussed economic trends with Drury University students Feb. 10 on the college’s campus following an invitation from Paul Nowak, professor of finance at Drury’s Breech School of Business Administration.

Greiner outlined three possible scenarios for the economy in 2010:

• No. 1: Gross domestic product grows at a rate of 3 percent; unemployment falls to 8.5 percent; and interest rates remain roughly at the current 5 percent level.

• No. 2: Inflation rises at a rate of 3.5 percent, and interest rates begin to rise.

• No. 3: The economy continues its downward trend; any growth that might have become apparent in late 2009 and early 2010 is actually “phantom growth” and the nation goes back into a recession.

Greiner said all three are plausible but that roughly 50 percent of economists believe the first will happen, while 30 percent are bracing for the second and 20 percent are preparing for the worst, the third scenario.

“One of the three will likely come to fruition,” Greiner said, noting that his firm predicts the first scenario is most likely.

Greiner said he forecasted the recession’s end last July, when a 3 percent growth rate in the nation’s leading economic indicators was seen. Shortly after that, temporary and part-time hires began to inch upward. Historically, temporary and part-time hiring generally precedes full-time hiring by about four months when coming out of a recession, Greiner said.

Although all five Institute for Supply Management indicators – purchasing managers index, new orders, production, employment and supplier deliveries – are up, Greiner said employers are being cautious, waiting for proof that the recovery is permanent before hiring full-time workers.

“We’re in a view that unemployment is going to be in the neighborhood of 8.5 percent to 9 percent,” said Greiner. “Temporary employment starts to pick up about four months before full-time employment.”

Another employment-related event that will help the recovery is government hiring. Greiner pointed out that the federal government will hire 1.3 million people to conduct the census in 2010, translating to a roughly 0.6 percent reduction in the nation’s jobless rate.

“If you’re graduating in the spring and you can’t find a ‘real’ job, go see the government, because they’re hiring,” he told the students.

Greiner also anticipated a second federal stimulus package, although he said it likely would be called a jobs package.

He predicted stronger economic growth in 2010, with a more permanent bull market likely to arrive within the next two to three years. He said the stock market currently is enjoying “a bull cycle in a bear period. Going back to 1900, we’ve been in three other occasions like this (decade),” Greiner said. “After they end, the market soars.”

Greiner came to Springfield from his Kansas City office and also visited his colleagues at UMB Bank while in town.