Shiller & Siegel: Bulls, Bears, and a Cloudy 2011 Economy

After years of recession, many economists are predicting a brighter 2011. But it's far from a clear picture.

For differing views, look no further than Robert Shiller and Jeremy Siegel, who debated America's macroeconomic future on Tuesday’s show (listen here.)

Siegel, a finance professor at the University of Pennsylvania’s Wharton School of Business, believes that the economy is due to rebound:

I’m very optimistic about this year. The data has really become much stronger, just over the last month. Almost every forecaster I follow has been raising their projections of GDP growth and becoming more optimistic. I think we’re…for the first time in a long time going to exceed expectations here in 2011.

But Shiller, professor of economics at Yale University and co-author of the Case-Shiller home price index, doesn’t have as rosy an outlook for the year ahead:

It’s definitely possible that we could see the GDP (grow) – we saw that about a year ago – we’ve had five consecutive quarters of GDP growth. But, you know, it hasn’t yet been enough to bring the unemployment rate down because we were really depressed. And to get back on trend we needed more than that.

Siegel expects the country’s GDP to grow, and hopes that the unemployment rate will drop. "I think we can have GDP of four to four-and-a-half percent growth, and I think it’s even possible we could bring unemployment down below 9 percent," he said. "But that’s the last indicator, as we know, to respond to any increase in economic activity, so that’ll be the last one to improve significantly. But, we’ve had some very favorable jobless claims data, just in the last couple of weeks, and that looks very good into the new year.

Shiller isn’t entirely doom and gloom. But he's certainly more cautious, especially after examining home prices trends.

“If nothing interferes with this growth we could see declines in unemployment, but I would say much more gradual than Jeremy (Siegel) suggested,” Shiller said. “I’m worried particularly about the housing market, which has started to fall – at least in our latest data.”