Economy Needs to Break ‘Shell Shock,’ Zandi Says

TUCSON, AZ — Though the luncheon keynote speaker at The B-to-B Marketing Conference here predicted a return to positive job growth in early to mid 2004 yesterday, he described a bleak short-term future.

“I’m concerned that businesses aren’t going to do what we expect them to do — that they’re not going to hire, that they’re shell shocked by all the things that we’ve been through and they’ve been through.” said chief economist and co-founder of Mark Zandi. “It’s hard to attach a probability to another terrorist attack, in fact, you can’t attach a probability to it,” he said. “So, if you can’t attach a probability to something, what do you do? You freeze.”

He then outlined a possible scenario that would include waning tax cuts and a drying up of refinance money.

“If you don’t have jobs, there’s nothing to fill the void,” he said, “and consumers are going to start pulling back and there’s no policy response to that.

“I’m concerned that it’s not going to play out the way we think it’s going to play out. This is the same kind of chicken-egg problem we had coming out of every recession. You’re wondering to yourself, ‘What’s going to be the source of growth? What’s going to drive us forward?’ “

He said all that is needed is one company from each industry to decide that it’s time to grow and expand and everyone’s going to follow.

“Businesspeople are sitting there looking at each other and saying, ‘Who’s going to go first? Who’s going to take that step?’ And ultimately someone does,” he said. “If they do that, everyone else has got to go with them, otherwise they’re toast. Hopefully, that’s what we’ll see. But all the risks, I think, are still decidedly on the down side.”

He also discussed foreign competition during the Q&A session.

“We’re getting creamed by the Chinese,” he said. “One of the reasons why manufacturing is being so hard hit is because we’re losing market share very rapidly [to] the Chinese, Singapore, Malaysia, Thailand, India, because they peg their currency. It’s not determined in the marketplace and their currencies are now substantially undervalued.”

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