Sep. 14--America's economic downturn will continue for the rest of 2008, but will bottom out without a recession and even improve in 2009, economic expert Joel Prakken.

Mr. Prakken is founder and chairman of Macroeconomic Advisers LLC, which develops and maintains the ADP (Automatic Data Processing) National Employment Report. He completed his undergraduate degree in economics at Princeton University and he holds a doctoral degree in economics from Washington University in Saint Louis.

Prior to founding Macroeconomic Advisers, he was Senior Economist at the World Headquarters of the IBM Corporation and served with the Federal Reserve Bank of New York.

The ADP National Employment Report, which was released last week, is a measure of employment derived from surveying about 500,000 U.S. business clients who represent nearly 24 million U.S. employees working in all private industrial sectors.

The report found job losses were worse in August than in June when the weakest monthly increase in jobs in six years was reported for small business -- those with 50 employees or less, Mr. Prakken said.

The weaker growth among small businesses is still better than growing job losses among larger firms, he pointed out. The trend is consistent with the comparative resiliency small business has demonstrated over the past several years, he added.

In June, employment among small-sized businesses rose just 7,000, Mr. Prakken said. In August, the same dichotomy existed. There was a loss of 33,000 jobs. Small-sized firms added 20,000 jobs, while medium- and large-sized firms shed 53,000 jobs. Meanwhile, a 78,000-job loss in goods-producing industries was offset by a gain of 45,000 jobs in service industries."

Mr. Prakken recently spoke with BusinessWeekly about the report, the trend among small businesses and his economic predictions.

Q: Why does this trend continue?

A: Manufacturing and construction had large employment losses in the August report, dominated by medium- and large-sized companies. Exports of manufacturing are booming, but domestic manufacturing is still contracting.

Q:How have soaring gas prices affected the economy?

A:Gas prices have been up the last several years. Unquestionably, their effect has been negative. They have affected consumer spending, which is two-thirds of the overall economy. Economic growth the first half of the year was very lethargic. But strong productivity will help us skirt a recession.

Q: Will the Christmas season help the economy?

A: We will have a very modest holiday season. There are so many consumer fundamentals lined up against it. Gas prices are still high, and banks have tightened their lending standards to households. Consumer spending was temporarily boosted by the tax rebates, but that is all coalescing now. It does not make for an especially robust holiday season.

Q: What does the rest of the year and the beginning of 2009 have in store?

A: Going forward, we will have monthly employment declines. By early 2009, the unemployment rate will be about 6.25 percent. But there is growing evidence the housing slump is ending. Overseas, where economies are expanding, the weak dollar is relatively low, so it is competitive in the global markets. Growth experts predict by the end of the year, we will get past the crux of problems without a recession, making for 2009 growth.

Contact the writer: jimdino@standardspeaker.com

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