Romer: Uncertainty Is Biggest Economic Effect of Flu Outbreak

ABC News’ Matthew Jaffe reports: As the world wrestles with the H1N1 flu, Christina Romer, chair of President Obama’s Council of Economic Advisers, said today that the economic consequences of the virus depend on how severe the outbreak becomes. "The fundamental determinant of course is how severe it is and that’s something that we’re just now starting to get the information on," Romer told a hearing this morning of the Joint Economic Committee. "Are we looking at a more typical flu and a flu with sort of a typical kind of mortality rate, or is it something more severe? And that’s going to fundamentally determine the public health consequences and the economic consequences." "Uncertainty is probably the biggest effect right now," she stated. "Whether it will make consumers nervous. Whether it will make, you know, governments will have to take actions that unfortunately will have economic consequences. That is certainly what we are facing, but certainly the administration’s job number one is to do whatever it takes to make sure that lives are saved." Discussing both the short-term and long-term outlook for the country’s economy, Romer today reiterated a common refrain from the administration: there are "glimmers of hope" that the economy is stabilizing, but further declines lie ahead.  "In the short run, we are surely in for more bad news," she said. "The economy we inherited was so weak, and deteriorating so rapidly, that even the aggressive actions we have taken can’t turn it around immediately." "We, like most private forecasters, expect another decline in the second quarter," she added. "And we expect to see continued declines in employment and rises in unemployment for the next several months." Despite her prediction that the nation will see more economic numbers like Wednesday’s news that the economy shrank at an annual rate of 6.1 percent in the first quarter, Romer still cited reasons for optimism. "There is every reason to think that the policies we have put into place over the last few months, together with the natural strength and resiliency of our workers and businesses, will spur recovery," she said. "Already we are beginning to see glimmers of hope that the economy is stabilizing. The housing sector has shown tentative signs of finding a bottom." "We currently expect that the pace of the overall decline in the economy to moderate sharply in the next several months," she continued. "This is consistent for example with the Blue Chip consensus forecast, which shows a rate of decline of GDP of 2.1 percent in the second quarter. We expect the economy to level out in the second half of the year and then begin to recover. Whether the recovery begins later this year, as most private forecasters predict, or takes a bit longer is hard to know." Compared to last fall, Romer noted that the nation now finds itself in a much improved economic situation because the government has taken actions to protect financial institutions from failures like the collapse of Lehman Brothers. "We are in a much more stable place," she said. "It’s not great, but certainly we have edged back further from that cliff and I think there is real hope that we will come through." — Matthew Jaffe