PU economist: economy recovering

WEST LAFAYETTE, Ind. (WLFI) - A Purdue University economist believes the economy is now in a state of recovery, but we still have a long way to go before we see it.

Purdue Agricultural Economist Larry DeBoer said the economy is not declining any more, but it will take time for unemployment rates to drop. DeBoer compares the recession to a deep hole.

"We have stopped digging ourselves into a hole and we are starting to climb ourselves out of the hole, but we are still in the hole. We are likely to remain in the hole for some time to come," he explained.

The U.S. unemployment rate is at 10%. DeBoer said the local, Lafayette area economy is comparable with U.S. economy.

"Our local unemployment rate went up in the last month, but the sample sizes on unemployment rates are so small that little changes can make big differences in the unemployment rate so I suspect, in a sense, that we have reached the peak or somewhere near the peak of unemployment. It is likely if they are going to increase, they are going to increase very slowly for the next year and it is possible it will decrease slowly," he said.

Now the country is beginning to dig itself out of its recession hole, how long will it take? DeBoer said to keep the unemployment rate from going up, the GDP will have to grow by at least 3% a year. This has to do with the number of students graduating from college each year because they are now looking for jobs along with people who are already unemployed. As the number of people looking for jobs increases, more jobs have to be provided just to keep the unemployment rate from rising. GDP has to grow by more than 3% to get the economy out of the recession and it won't happen over night.

"Gotta be four or five years at best," DeBoer said. "The thinking is the GDP will grow 3% this year. Maybe a little bit more which is going to imply nothing much is going to happen to the unemployment rate this year. If GDP grows faster, if it grows 4% or 5%, that would be a pretty healthy recovery and that would be bring the unemployment rate down. "