Today I attended the Harrisburg Regional Chamber’s annual economic forecast luncheon. Dr. Jay Bryson, Director and Global Economist at Wells Fargo Bank (and a
- While the fourth quarter showed a 5.7% increase in Real GDP, a large chunk of that increase came from Government Stimulus.
- Part of the recent lift in GDP is the result of inventories being replenished. During the first three quarters of 2009 most organizations did as much inventory liquidation as possible. This recent bump is nice but probably not sustainable.
- However, the fourth quarter did have about 2.0% growth taking out the inventory lift and the stimulus, which is pretty good, all things considered.
- Capital spending is moving up and being led by technology. This is largely due to many businesses doing very little spending in this area during the past year.
- Exports are trending up and a good sign (this could also be due to a weaker dollar).
- He is 75% sure the recession is over, based on the strict definition (positive GDP growth).
- However, if you ask people on the street how they define a recession - it is all about JOBS. He thinks unemployment could be as high as 9% or 10% at the end of the year and it may not feel like the recession has ended for many.
- Household debt is still very high and consumers are saving money and paying down debt. With 66% of the economy driven by consumer spending, he believes 2010 could be a very flat year.
- We lost 7 million jobs in 2 years and if we can start creating jobs at the pace we did in the past decade (150,000 per month), it will take 4 years to get back to where we were. This will be a long jobs recovery!
- We may see a slight spike in the employment numbers with the census hiring. The government will add about 800,000 people. These jobs will then disappear by mid summer.
- Some wildcards that could negatively impact the recovery would be commercial real estate being worse than expected, obviously a terrorist attack, and OPEC moving oil to $150 a barrel.
- He did address inflation and said in the short term it is a small risk as we have so much deflationary pressure (meaning we have more goods and services then we need and prices are being driven down).
- He also discussed how some regions of our country had a housing bubble. Recovery in those regions will be much longer.
Based on his analysis and comments, it would seem that 2010 will be better than 2009, but certainly not a banner year. He did mention the problem of health care costs and the escalating cost of entitlement programs (social security…). If we do not get these under control soon, our country is on a collision course.
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Great summary Scott. Regarding Dr. Bryson's comment about Health Care, he sighted the increasing cost and the increasing amount of income going into health care as the crisis. To his point on health care reform, cost drivers need to be addressed first. We have not seen that addressed in what is being discussed.
Once again, good job Scott. Thank you and all others who attended.
Posted by: Dave Black | February 05, 2010 at 02:16 PM