Compiled by Galynn Nordstrom, Janet Preus, Chris Tschida and Susan Niemi
What price recovery?
The great recession officially ended in July 2009, according to federal economic indicators, but “it doesn’t feel like it,” says Prof. John E. Connaughton, UNC Charlotte, keynote speaker at IFAI Expo Americas 2010 in Orlando. The Gross Domestic Product (GDP) started to grow again in Dec. 2009, but tight credit and consumer uncertainty mean that unemployment is still close to 10 percent in many parts of the country.
“Despite the highly publicized Wall Street failures and bailouts, this was not a financial recession—it’s a blue collar recession,” says Connaughton. “It started with $4 a gallon gas in the summer of 2007, taking $450 billion out of consumers’ pockets, then came the credit/bank crunch, and then it piled on.”
The U.S. economy had enjoyed exceptionally long periods of growth, especially in the 1990s, notes Connaughton, but because of productivity gains and outsourcing, the manufacturing and construction industries continue to suffer, and may never return to full strength. Job gains now are most often in the areas of business services, higher education and health care.
“If we’re lucky, we may create a million jobs in this first year of recovery,” says Connaughton—and this won’t be enough for growth. “The GDP has to grow by 3 percent just to break even; at 4 percent, then you get a 1 percent growth in employment. At this rate, it could take seven or eight years to get back to previous levels.”
There are some positive indicators, he says: relatively steady oil prices, the stimulus, government encouragement of banks to increase lending. But consumption and consumer confidence will take time to recover, there is still a credit crunch, and the federal budget deficit is still predicted to be at $1.3 trillion in 2011.
The mid-term elections have come and gone, leaving us with no strong political mandates in Washington. It’s not clear at this point what effect this will have on the U.S. economy, but according to Connaughton, it’s possible that a politically neutral economy could be the best course.