Economist: High gas prices might dampen economic outlook
Posted April 13, 2011 10:36 p.m. EDT
Updated April 14, 2011 11:55 a.m. EDT
Raleigh, N.C. — High gas prices, which are steadily climbing toward $4 a gallon in the Triangle, might dampen projections that the economy was making a comeback, according to a North Carolina State University economist.
"We're still expecting the economy to grow and to add jobs, just not as strong as we thought it would before gas prices went up," said N.C. State professor and economist Mike Walden.
He said experts expected the economy to grow at a rate of 3 percent over the next year and create 1 million jobs. But experts are downscaling those figures now that gas prices are soaring, Walden said. He predicts the economy will grow 2.5 percent and add 600,000 jobs.
The U.S. lost about 8 million jobs over the course of the recession, and has gained about 1.5 million back so far, Walden said.
In January, Walden said rising gas prices were a "good sign" that reflecting the global economy was rebounding from the recession. He said Wednesday, however, that continued increases in energy costs cut down on consumer spending, which hurts businesses in the U.S.
"The problem when gas prices rise – other than it hurting our wallet – is that all that money goes out of the country," Walden said. "That leaves us as a country with less money to spend."
He said economists are worried that a decrease in consumer spending could potentially "harm the economic recovery we're in."
Triangle drivers are reporting that they're cutting back on gas in any way they can.
Kristin Graham lives in Raleigh, but commutes to Fayetteville for work.
"I'm feeling the gas prices for sure," she said.
But she's rearranged her schedule to cut down on her fuel usage, and it's paying off.
"I've actually gone from an 8-hour day to a 10-hour day so I can work four days a week," Graham said. "Every month, that's going to save me about $50."
Similarly, Raleigh resident Ed Johnston's long-distance marriage has put strain on his wallet.
"My wife lives in Charlotte and every weekend I drive back," he said. "Right now, it's killing us. We're going to have to go to every other weekend because gas prices are so bad."
Economists say that when gas prices go up, most people cut back on shopping and dining out, but restaurant managers at Hibernian Pub and 518 West Italian Cafe on Glenwood South in downtown Raleigh say they're seeing the opposite trend.
"In the past, when weekends came up, people would generally stop by for lunch on their way out of town to the beach," said Hibernian bartender Jim O'Neill. "But now I see people that usually go to the beach on weekends are here for the weekends."