This WSU Newsline Podcast is available at http://www.wichita.edu/newslinepodcast. See the transcript below:

You’re listening to the podcast edition of the Wichita State University audio newsline. Learn more about WSU — the home of Thinkers, Doers, Movers and Shockers — on the Web at wichita.edu.

Americans are earning and spending more, but that doesn’t mean the hoped-for economic recovery will be robust this year. Wichita State University economist Jim Clark explains.

Clark: “Economic recovery was starting to kick in and show some improvement, but we’ve got a bunch of things now happening in the world that are getting in the way of that recovery.”

Mark Zandi, chief economist at Moody’s Analytics, has reduced his forecast for 2011 economic growth from 3.9 percent to 3.5 percent. That would still be better than last year’s 2.9 percent growth and the biggest expansion since before the recession. Still, there are a number of reasons why the economic growth may not be as great as was hoped. Clark says at least one reason is the natural disaster in Japan.

Clark: “The earthquake and tsunami in Japan have knocked out a whole lot of factories that make lots of little bitty pieces that our economy needs. Carmakers are cutting back on production because they can’t get things like paint ingredients or little pieces of electronics that go into pollution control equipment.”
Clark also says unrest in the Middle East is another factor affecting our economy.

Clark: “The unrest in the Middle East is driving up energy prices, mostly because people don’t know where that’s going in the future. And nobody seems to have a clue what country is next in the Middle East.”

A senior economist at IHS Global Insight said: “When food and gasoline prices are rising, it causes people to hunker down. And Clark says the cut in Social Security taxes isn’t having the effect the government had hoped for, because of rising gas prices.

Clark: “One of the things the U.S. government did at the beginning of the year to try to improve the economy was to cut our Social Security taxes 2 percent. But instead of spending that money on stuff made in the U.S., now most of that’s going toward buying gasoline.”

Unlike some other kinds of spending, paying more for gas doesn’t help the economy much. Most of the money goes overseas, and higher prices leave people with less money to buy appliances, computers, plane tickets and other things that can be postponed.

The Social Security tax cut will give most households an additional $1,000 to $2,000 this year. In December, when President Obama signed it into law, economists predicted higher take-home pay would lead to more spending and stronger economic growth.

But gas prices have jumped more than 50 cents a gallon this year. The fact is, external events will always affect our economy, according to Clark.

Clark: “Despite all we know about the economy and all the things that a variety of people have been doing to try to make things better, we’re still always going to be at the mercy of outside events.”

Some of the earlier enthusiasm for a strong economic recovery has waned, as Clark explains.

Clark: “A couple of months ago it looked like we were really going to be moving into a recovery this year, but now it looks more like we’re, at best, going to be just treading water, staying where we are, but unemployment not dropping significantly.”

There’s also a psychological factor when gas prices, a consumer necessity, keep rising. Those higher prices tend to rattle consumer confidence. People feel poorer, and they’re less likely to spend freely.

Ultimately, less spending can hurt job growth because businesses will feel less confident. Chris Christopher Jr., senior economist at IHS Global Insight, said a rise of 25 cents a gallon in gasoline prices, if it persisted for an entire year, could cost the economy 270,000 jobs.

Thanks for listening. Until next time, this is Joe Kleinsasser for Wichita State University.