365-Day Forecast

Will the economy bounce back in 2002? We'll let the experts answer that one.
Magazine Contributor
4 min read

This story appears in the January 2002 issue of Entrepreneurs Start-Ups magazine. Subscribe »

Ken Goldstein, economist, The Conference Board

"It's a recession. It certainly will last at least into the first quarter of 2002. I wouldn't be surprised if it lasted into, though not through, the second quarter of [2002]. What got us into recession is not what happened on September 11, but what happened in terms of profit squeeze. Starting in the fourth quarter of 2000, we had an extremely tight labor market. As a consequence, we had 4 percent-plus wage growth and [increased production costs]. Yet prices were only rising by about 2 percent. That began to erode profitability long before September 11.

"Most recoveries are consumption-driven and investment-sustained. So, too, with this one, except that investment is going to kick in a little sooner and a little more strongly than has been typical in past experiences. It's that combination that will not only get us out of recession, but drive us strongly out."

Mick Riordan, senior economist, The World Bank

"It looks to me [like] at least two quarters of negative growth-which would constitute a technical recession. The potential for an extended decline for the first quarter of [2002] is there. But most analysts believe this could be a two-quarter phenomenon. [The rebound] appears to be shaping up as more V-shaped than U-shaped. The Fed has been aggressive in reducing interest rates. [And a substantial] amount of [economic] stimulus appears to be forthcoming, if you take the emergency measures that have already been appropriated and the discussions going on in Congress [at press time] about a stimulus bill for 2002. We think the combined effects of those two factors, plus lower oil prices, should be sufficient to move us back into positive territory, probably by the second quarter of [2002]."

Jan Hatzius, senior economist, Goldman Sachs Group

"We'll have a very gradual recovery next year-third or fourth quarter is our forecast. Basically, there are two problems. In the consumer market, not only is there is a very low savings rate, but personal consumption is probably going to stay pretty weak. On the business side, business investment is down because it's gotten much harder to find financing. It's become very clear that we live in a high-risk world, both physically and financially, and we're not really prepared for risk."

Edmund Mennis, independent economic and financial consultant

"Two quarters down I think are fairly certain, and there could be other down quarters in 2002. A lot of economists seem to believe [the economy] is going to bounce back. My own feeling is that it's going to be a much more gradual recovery rather than a rapid one.

"[The business sector] has been hurt and has cut back on business spending plans. I think the [cutbacks will increase]. They've also been trying to economize using job layoffs, [a trend] I think is going to continue and perhaps grow. [Combine this with the unlikelihood of] a surge in consumer confidence or a surge in consumer buying, and consequently the recovery is going to be slower."

Mark Zandi, chief economist, Economy.com

"I think we are in a full-blown recession. The economy is contracting, employment is falling; industrial production is declining; retail sales are declining. When the economy will come out of recession depends critically on when personal safety is re-established. The economy is going to have difficulty until there is some kind of resolution to recent events.

"The best-case scenario would have a recovery beginning in early [2002]. But that would assume there are no more terrorist attacks of any consequence, that there is some resolution to events, and that people become more comfortable traveling. It's not difficult to construct a much more pessimistic scenario where the economy struggles all the way through [2002]. When the economy is going to hit bottom depends on political and military events that are inherently unpredictable. That's what makes the current period so dangerous."


More from Entrepreneur

Get heaping discounts to books you love delivered straight to your inbox. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Starting, buying, or growing your small business shouldn’t be hard. Guidant Financial works to make financing easy for current and aspiring small business owners by providing custom funding solutions, financing education, and more.

Latest on Entrepreneur