Analyst: Fed will prevent recession

BALTIMORE (Map, News) - Rising unemployment, weak retail spending and reduced manufacturing totals.

The United States is undoubtedly in the midst of a “midcycle economic slowdown,” Philip Orlando, chief equity market strategist for Federated Investors, told a group of Baltimore banking and business leaders Tuesday.

Federal Reserve Chairman Ben Bernanke, though, knows what it will take to avoid a recession, Orlando said.

“The odds of [a recession] occurring have increased significantly in the last three weeks,” Orlando said. “I think, ultimately, the Federal Reserve is going to keep us out of recession.”

The Fed will likely cut its key federal funds rate by at least half a percentage point to 3.75 percent by the end of the month and could make additional cuts in the spring, Orlando said. Seventy percent of the U.S. gross domestic product is tied to consumer spending, and the Federal Reserve hopes the cuts motivate businesses and consumers to spend.

“The Federal Reserve is not going to ignore the sharp downturn of the U.S. economy,” Orlando said.

Lost in all the bad news, Orlando pointed to rising corporate profits, global economic growth and increased technology spending as positive U.S. economic indicators.

And Baltimore, with its strong academic foundation and skilled work force, is better positioned than most cities to survive an economic downturn, Orlando said.

“The academic base provides you with above-average per capita income and low unemployment,” Orlando said.

The region, though, isn’t without challenges.

“The underclass is in the midst of a foreclosure crisis, but I don’t believe the impact is any more or less than what other communities are facing,” Orlando said.

David Downey Jr., senior vice president of Colliers Pinkard in Baltimore, attended the forum Tuesday and said he was cautiously optimistic about the U.S. and Baltimore economies.

“In my line of work, I’m handling office leasing transactions, and Baltimore has transitioned to a service- and knowledge-based economy,” Downey said. “I’ve seen the growth in the areas [Orlando] talked about.”

The Harbor Bank of Maryland hosted the forum. Joseph Haskins Jr., president and CEO of Harbor Bankshares Corp., said it was good to hear positive words about the Baltimore economy.

“We can say good things about ourselves,” Haskins said, “but more people tend to believe it when an outsider says the same things.”

2008 stock picks

» Favorable: Technology, energy, materials and industrial companies

» Defensive: Consumer staples (food, drugs) and health care companies

» Unfavorable: Consumer discretionary and (housing, auto) financial companies

Source: Phil Orlando,

Federated Investments

acannarsa@baltimoreexaminer.com

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