Five signs to measure economic recovery in 2010
Economic recovery in 2010 is likely to fall short on job growth. But higher jobless figures might not be a bad thing – if it signals people are looking for jobs again.
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In 2009 surveys, Gallup found, self-reported discretionary spending fell 20 to 30 percent from 2008 levels. Mr. Jacobe expects discretionary spending to stay about the same for the first half of 2010 – bad news for many retailers.Skip to next paragraph
Unfortunately, it won’t be any easier to get credit next year. “The threshold of good credit and excellent credit – those bars have been raised,” says Bill Hardekopf, CEO of LowCards.com and coauthor of “The Credit Card Guidebook.” “In 2009, credit was darn tight, and it will be just as tight in 2010.”
4. Small- and medium-sized businesses begin to expand again
With consumers watching their pocketbooks, small businesses such as restaurants, dry cleaners, and hardware stores do not have much reason to hire or expand. But in general, they provide most of the new jobs in the United States, so it’s important that they get back on track.
William Dunkelberg, chief economist for the National Federation of Independent Business (NFIB), expects 2010 to be a “subpar” year for small businesses. That means growth of less than 3 percent, he says.
“NFIB surveys [of its members] show hiring plans and capital-spending plans at 35-year lows,” he says. “With no customers, you don’t need inventory, you don’t need delivery trucks, you don’t need to add to the payroll.”
The outlook is even worse for the construction industry, which is typically made up of small businesses. Spending on construction will fall 5 percent in 2010, projects Ken Simonson, chief economist for the Associated General Contractors of America in Arlington, Va. That’s after construction spending shrank by as much as 7 percent this year. “I’m pretty pessimistic,” he says.
Although money from the 2009 stimulus package is still being funneled to contractors, it is not enough to make up for canceled contracts by states, municipalities, and commercial contractors, Mr. Simonson says. The only good news for 2010: The number of new homes being built is likely to grow after three down years.
5. Washington remains engaged in trying to help the economy
Many economists agree on that, but the process is likely to be contentious: Republicans are opposed to spending on new programs and would prefer tax cuts.
Congress will have about $200 billion in unexpected revenue because many banks have repaid their bailout loans early or have not needed the money. On Dec. 16, the House narrowly passed a $154 billion jobs bill that would draw on this money. The legislation would provide funding for job training and transportation projects. But the Senate is not expected to take up the package until early 2010 – and it’s not clear that Democrats have enough votes.
“Yes, they will pass a bill called a jobs bill,” Simonson predicts. But it may be limited in scope: “At a minimum, it will contain an extension of the Highway Trust Fund [construction money that would add jobs] at its current spending levels, additional unemployment benefits, and a COBRA [health insurance] subsidy.” But he doubts Congress will pass a big addition to the highway program or take other steps to create jobs.
If nothing passes in Washington, the outlook for 2010 and beyond could darken, warns Mr. Zandi of Moody’s Economy.com. “If there is not more aid to state governments and unemployed workers, the odds are the economy will slip again,” he says.