Local experts see tough times continuing a while

Financial experts didn't have much good news to share with area business leaders Thursday.

The Naperville Area Chamber of Commerce held its annual Regional Economic Forecast to discuss the state of the economy and where it is headed.

"Don't expect the worst, but it's going to be tough times going forward," said Paul Kasriel, senior vice president and director of economic research at Northern Trust.

Kasriel was one of three panelists, joined by John Calamos, chairman, chief executive officer and chief investment officer for Calamos Investments and James Panzarino, senior vice president and chief credit risk officer of Discover Financial Services.

The three said they don't expect to see the economy start to recover until late next year or early 2010 at best.

Nationwide, unemployment is at 6.1 percent and Kasriel expects it to reach 7.5 percent or higher next year.

Consumer confidence is also at its lowest point in 40 years, according to Panzarino.

A Discover Financial Services survey found 51 percent of respondents expect to spend less on discretionary items in the next month.

"We see ... a shift in where people are spending money so there's less discretionary spending, more spending on groceries, less spending on going out to a fine restaurant or travel," Panzarino said. "People are being a lot more conscious and spending less. On an ongoing basis we expect that trend to continue at least for the foreseeable future."

From a stock market standpoint, Calamos said he believes the recent actions by the government to support the banking industry will help it normalize.

"We all hate too much government intervention but I think what the Fed is doing here and the government is doing ... is really a big plus," he said. "We have to get the banking system going. Guess what? The economy doesn't work without a banking system."

But Kasriel said there's no such thing as free bail out.

"I believe the intervention is helping Wall Street more than it is helping Main Street," he said. "It's helping stockholders and bondholders of financial institutions and what we're seeing is an increase in interest rates already."

Kasriel said he doesn't think the banking sector has hit rock bottom yet and expects more consolidation and regulation in the months to come.

Asked what effect the upcoming election will have on the economy, Calamos said typically it takes awhile to feel impact. He believes it will depend on how the next president executes the government's plan for economy and what kind of tax increase the administration imposes.

His advice to those in the audience was not to panic out of the market and that opportunities exist for patient investors who look long-term.

"It's too late to get out of the market," he said. "If we had the foresight six months ago to say housing is going to collapse and the market is going to go down 50 percent, get out of the market then. But now that's already happened so if we think what the government is going to go is going to be positive I would be looking beyond this crisis."