By Lauren Otis, Staff Writer
The chief economist of PNC Financial Services had little good news about the economy for attendees of an investment briefing other than to say that eventually it, and stock prices, would turn around.
”You are getting a little tired of hearing it and I am getting a little tired of saying it: things haven’t hit bottom for the U.S. economy. They look like they are going to get worse before they get better,” said Stuart Hoffman, senior vice president and chief economist for PNC.
”In the first part of this year the economy will continue to deteriorate,” with at best three to six months before there are any initial signs of a recovery, Mr. Hoffman said at the PNC investment briefing held Tuesday at the Nassau Club in Princeton. “The region will suffer, but will recover,” in 2011 and 2012, along with the rest of the country, he said.
”Central New Jersey is not an island,” insulated from the national economic problems, Mr. Hoffman noted. “Even with the stability of the university and proximity of state government,” he said, “recession in terms of lost jobs will be here in Central New Jersey.”
Unemployment is currently around 5.75 percent in the region, but “we think it will get close to 8 percent; the national number will get close to 9,” Mr. Hoffman said.
Six months ago the U.S. financial markets and economy were faltering but the view was that the economies of other nations — China, India, Russia, Brazil, Latin American countries and others — were still going strong, Mr. Hoffman said.
”There was this feeling that the U.S. economy could de-couple and go its separate way,” he said. This turned out not to be the case. “It is a global recession and I say that because the recovery will also have to be global,” Mr. Hoffman said.
”OPEC killed, or helped kill, the global economy,” by curtailing oil production and pushing the price of crude oil far above $100 a barrel, Mr. Hoffman said.
”The drop in oil prices is like a huge tax cut for the U.S. economy,” he said, but low prices should not slow the country’s push toward greater fuel efficiency in the future. “That opportunity should not be lost,” he said, adding the country can’t “get hooked on our habit again just because the pusher is having a sale of $40 a barrel.”
Because of the attention to the economy paid by every sector of society currently, and the public’s large interest in insights provided by economists like him, Mr. Hoffman was introduced by Christine Lokhammer, senior vice president of PNC Wealth Management in Princeton, as a new “rock star” of the times.
”My idea of groupies is a little different than all of you in the room, but frankly your idea of a rock star is probably different from me, so we are even,” Mr. Hoffman said.
He likened his talks on the economy to “PNC economic group therapy. We all get together and commiserate and try and help each other through these bad times.”
Mr. Hoffman said it would be great if wishing the economic picture were better made it so, but “Tinker Bell isn’t here.” That said, “over time it will be very important that the mind set begins to reflect a little more hopeful outlook,” he said.
The improvement in the national mood since the election of Barack Obama as president was an example of a shift to a more positive outlook, he said, something that isn’t reflected in the unrelenting negative commentary on television and elsewhere about the economy. Mr. Hoffman told listeners he was trying to “not scare the hell out of you,” but give more balance to the economic situation.
Describing what he called a “recovery recipe,” Mr. Hoffman said some ingredients are already present, including low oil prices and interest rates, while others hopefully will come about in the months ahead, including getting credit flowing and the beginning of recovery for housing prices and the stock market. These would then boost consumer and investor outlooks — “psychology, that’s the yeast in my crazy analogy” — and move the nation into a recovery, he said.
”My guess is we will begin that healing process later this year but it will be 2010, 2011, maybe later before we get out of this,” he said.
”I don’t see it happening now, but I do see many of these essential ingredients mixed in, with others added in the next six to nine months,” Mr. Hoffman said.
Asked his view on nationalization of large American banks in the current crisis, Mr. Hoffman said “under the current circumstances it would be a big mistake if one of our two or three biggest banks were to fail,” and the current government capitalization plan for them is warranted.
”If we did have a major bank failure the results of that could negatively impact an already negative situation and could make this recession deeper and longer,” Mr. Hoffman said.
”Nationalization is a charged word,” he said, noting that truly nationalizing a bank would necessitate the federal government completely taking over, installing a new board of directors and management, something there are no current signs the government is contemplating.

