Economic recovery will be a long hard road

By Thomas Oliver

The Atlanta Journal-Constitution

Been down so long, just about anything looks like up.

That’s my economic forecast for 2010: It won’t feel very good, but it won’t hurt nearly as much as last year or the year before.

Or as Jeff Rosensweig, professor at the Goizueta Business School at Emory University puts it: “The economy will continue to bring more pain than joy.”

That’s because even as the economic engine begins to revive, the main drivers of the economy will remain overly cautious.

“Consumers are still shell shocked from the massive losses incurred during the recession,” says Mark Vitner, managing director and senior economist at Wells Fargo Securities.

And no wonder. Even with the recent rebound in the stock market, household net worth remains $12.6 trillion below its 2007 peak, Vitner notes.

As if that weren’t enough, consumer spending will be restrained again this year by the unemployment rate, which will remain high.

Consider this: the U.S. economy needs to create more than 150,000 jobs a month to reduce the unemployment rate. That’s not likely to happen anytime soon. The unemployment rate in Georgia will continue upward, peaking at above 11 percent by mid-year, according to UGA’s Selig Center’s annual economic forecast, prepared by Jeffrey Humphreys.

The Athens economist predicts it will be 2013 before the national economy has fully replaced the 8.5 million jobs lost during the Great Recession.

When you add in the need for additional jobs to keep pace with the population growth, Vitner points out that the nation’s unemployment rate won’t return to its pre-recession rate of 4.6 percent during the coming decade.

Is there any good news?

“The good news is that most of the bad news has finally run its course,” Vitner says.

Housing should improve, if for no other reason than more inventory will be depleted. The sense that home prices have stabilized may prove to be an illusion, however, especially for higher-priced homes.

It will be at least another year, perhaps two, before housing could be described as a growth industry.

The Selig Center’s forecast says business spending will increase “sharply,” particularly for transportation equipment, computers, software and communications.

Rosensweig sees health care and education as two sectors that will continue growing and creating new jobs.

Their growth is driven by favorable demographics.

The professor sees exports as a particularly strong contributor to our economy, with the growth of such populous emerging economies in China, India and Indonesia coupled with a weakened dollar (which makes our products cheaper worldwide).

Vitner sees the fundamental drivers for Georgia’s economy as strong.

The city and state remain attractive and affordable places for businesses and job seekers to relocate to.

“Not only is Atlanta the largest metropolitan area in the region but its strong ties with the global economy and growing international connections make it an increasingly important location for companies doing business overseas,” Vitner says.

This time next year, we’ll have hard evidence that the economy did in fact improve. But in 12 months, we’ll still be wondering just how long it’ll take before we get back home.

Thomas Oliver writes the Sunday business column. He can reached at toliver.writeright@gmail.com