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Reasons for cautious optimism

Old National CEO will tell his Tuesday at economic forum


Bob Jones is acutely aware that the U.S. economy is fragile.

The president and CEO of Evansville-based Old National Bancorp said the economy’s slightest sneeze quickly progresses to pneumonia.

“It’s still a very slow recovery,” he said.

But the banking executive still sees reasons for optimism, including projected gains in gross domestic product.

Jones will share his economic outlook Tuesday as one of the scheduled speakers at the Northeast Indiana Economic Forum. The first-time event is being hosted by Old National Bank, accounting firm Crowe Horwath and payroll services provider ADP.

Bob Hall, Old National’s Fort Wayne market president, expects about 150 people to attend the invitation-only lunch at Ceruti’s Summit Park.

Jones, who serves on the St. Louis Federal Reserve Board of Directors, said last week that national attention on the federal spending cuts known as sequestration has overshadowed the significant pain taxpayers have experienced since a 2 percentage point payroll tax break expired Dec. 31.

The Tax Foundation, a non-partisan research organization in Washington, projected in November that expiration of the 2-year-old payroll tax break would cost the typical Hoosier family $1,387 this year.

“That’s real money,” Jones said. “I just don’t think we gave it enough attention.”

The money, he said, came from the paychecks of people who least could afford to lose it – the lower- and lower-middle class. Many of them are living paycheck-to-paycheck.

“You’re only as strong as those folks who need help the most,” he said.

The American Bankers Association, among others, is lobbying Congress to restore payroll tax relief.

Jones isn’t discounting the additional pain caused by sequestration-related job furloughs and the $12.9 billion in international bailout loans made to Cyprus banks in March. And he worries about China’s economic slowdown and how that will affect U.S. exporters.

Some business owners share Jones’s concerns.

Results from the 2013 U.S. Bank Small Business Annual Survey, released last week, show that although 45 percent of survey participants think the nation’s economy is in recovery, 43 percent believe it’s in recession. The rest of those polled were unsure – 10 percent – or indicated expansion – 1 percent.

The fourth-annual survey, conducted during the first quarter, polled 3,210 small businesses with $10 million or less in annual earnings. The survey sample was taken in the 25 states where Minneapolis-based U.S. Bank provides services.

Those surveyed don’t see the economy getting worse over the next year, however.

Asked what they expect their revenues to be at the same time next year, 41 percent said higher and 47 percent responded that income will be about the same.

The key to a robust recovery, Jones said, can be found at the nearest clothing, hardware and grocery stores. Throw in a few restaurants, too.

“I just think the consumer will lead us out of any economic downturn,” he said. “When the consumers feel good, they’ll spend.”

Although it might sound difficult to measure feelings, researchers do. It’s a vital statistic because consumer spending accounts for about 70 percent of the U.S. economy.

Consumer confidence inched up in March to 78.6 from 77.6 the previous month, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment.

The benchmark of 100 was set in 1985.

During the recession, the index averaged 64.2. In the five years before the recession, the average was 89.

Jones measures the economy primarily based on consumer confidence and gross domestic product, what he described as “sort of the gas that runs the economy.” GDP measures the value of all goods and services produced in the United States.

As the GDP increases, so should consumer confidence, he said. Any disconnect between the two signals a problem, he said.

Goldman Sachs has increased its second-quarter GDP forecast to 2.9 percent from 2 percent, which gives Jones hope that things are getting better.

“I’m more optimistic than I was last quarter, when I was more optimistic than the quarter before that,” he said. “And I’m damned glad I live in Indiana.”

Jones said the state’s budget surplus and business-friendly atmosphere help to attract new employers to invest in operations here.