US economy still stuck in first gear for 2013, economists say - 13 WTHR Indianapolis

Indiana University economists say 2013 will bring "unacceptably slow growth." Kelley School of Business economists say the US economy underachieved in 2012 and they expect more of the same in 2013.

The economists point to the so-called "fiscal cliff," a combination of higher taxes and government spending cuts, that could play a huge rule in shaping the economy.

They expect the national economy to grow by around 2.5 percent in 2013 - that's if it doesn't go over the "cliff." That's up from 1.7 percent growth in 2012.

The fiscal cliff refers to the terms of the Budget Control Act of 2011 going into effect at the end of the year. If Congress cannot reach a compromise deal, it means an end to temporary payroll tax cuts (which translates to a two-percent tax increase for workers), a change to the alternative minimum tax, along with an end to tax cuts from 2001-2003, certain tax breaks for businesses and the beginning of taxes related to the new health care reform law.

The deal was struck as part of the debt ceiling deal in 2011, and it includes deep spending cuts involving 1,000 government programs that include the Department of Defense and Medicare.

"Without congressional compromise -- something we have little experience with recently -- a long list of tax increases and spending reductions will go into effect on Jan. 2," said Bill Witte, associate professor emeritus of economics at IU and a member of the panel. "If 'C-Day' were to materialize, it would almost certainly put the economy back into recession with negative growth for much of next year, decline in employment and rising unemployment.

"No money, no jobs, pretty much no hope," said unemployed worker David Schlarb.

As for jobs, the economists are forecasting "modest" growth, with about two million new jobs. But the unemployment rate will remain above 7 percent, and inflation will remain close to 2 percent.

"It goes through my mind, how I am going to take care of my family and kids," said Richard Thurman, one of 150 people applying for 24 seasonal jobs with INDOT Thursday.

The highway maintenance work is tough and temporary. It lasts six months, pays $15/hour and there are no benefits.

"It is nothing to sneeze at. A lot of people make a whole lot less. I will take it, happily," said Charles Sides.

In Indiana, the job market is improving somewhat, with a projected payroll job growth of 50,000 or more jobs in 2013. But the panel says the state is still a few years away from its pre-recession employment level.

"I put applications in everywhere," said Theresa Danzy.

The dreary forecast confirms what some workers already know. Brian Tessereau just lost a corporate sales job.

"No, never seen this coming. We never seen this coming ever in my life, I thought we were set," he said.

Personal incomes in Indiana are expected to rise less than two percent, with per capita incomes growing by about $1,500. The state's overall economic output will grow by about 2.3 percent, comparable to the national rate.

There are some positive signs for 2013. Look for housing construction and home prices to continue to improve, as well as stock prices. Energy costs, including oil and gas prices, should level out.