2011 Doesn’t Look Much Better than 2010

by

The U.S. Economy Is In a Flatline Mode.
Consider the Situation When You Vote Next Month

Last January, I attended a dealer 20-Group meeting and offered my outlook for the year. In a nutshell, I told the dealers not to expect a flood of excited customers in the spring; it just wasn’t in the cards. And, in my view, they would be better off planning for a slow season rather than hoping for a heavy increase in floor traffic. I was roundly criticized by one successful dealer for being too negative.

Unfortunately, traffic did not pick up in the second and third quarters and this quarter doesn’t look too hot, either. Now, looking ahead, I don’t think there is much hope for a big improvement in 2011. I’m basing my initial forecast in part on what I’m hearing from a number of sources, and in part on an excellent analysis that appeared Oct. 12, 2010, in the  New York Times. The lengthy report carries the gloomy headline, “Across the U.S., Long Recovery Looks Like Recession.” I suppose I could stop right here; you get the point.

The bottom line is that it’s going to take years to recover from this recession, the downturn that’s been the worst for this country since the Great Depression. Consider the situation as you build your 2011 business plan and as you stand in the voting booth next month.

We have several problems that can’t be solved in the short run: High unemployment, breathtaking national debt, a banking system that continues to malfunction and a residential and commercial real estate market that’s flat on its back. These problems most like are going to run through 2012 and beyond.

And that means that people simply are not going to have the discretionary dollars to spend on the toys that we sell. Even if they feel good about the economic situation, which they don’t.

Take the unemployment situation. Notes the Times: “At the current rate of job creation, the nation would need NINE MORE YEARS (my emphasis added) to recapture the jobs lost during the recession. And that doesn’t even account for five or six million jobs needed in that time to keep pace with an expanding population.” And it doesn’t consider the number of people who are underemployed or who have taken substantial pay cuts during the last 18 months. Or the ones whose employers have stopped matching 401 (k) contributions or increased employee’s health care costs.

“No wonder Americans are pessimistic and unhappy,” says Allen Sinai, chief global economist at the consulting firm Decision Economics. “The only way we are going to get in gear is to face up to the reality that we are entering a period of austerity.”

Elliott D. Pollack, another forecaster, has a similar opinion: “You had an implosion of every sector needed to survive. That’s not going to get better fast,” Pollack told the Times, in discussing Arizona’s economic picture. Pollack is a leading Arizona economic forecaster. “We won’t recover until we absorb 80,000 empty houses and office buildings and people can borrow again,” says Pollack. Unfortunately, he says, that won’t be for several years. “I’m forecasting recovery by 2013 to 2015.”

Unfortunately, bankers aren’t in any mood to make consumer loans. Federal regulators have closed 129 small banks across the country this year, up from 25 last year, the Times report notes.

While Washington bureaucrats and politicians like to say that America’s economic situation has stabilized, many disagree with this assessment. “We are in a situation where our vulnerability to any new problem is great,” Carmen Reinhart, professor of economics at the University of Maryland, told the Times.

And overhanging all the other problems is the huge debt being built up by current Washington spenders. Much of the bailout and stimulus spending may have been necessary— only history can be the judge of that— but the growing amount of U.S. paper held by foreigners, especially the Chinese, certainly limits our foreign policy options.

The picture isn’t totally bleak, of course. The American economic engine is still one of the strongest in the world. “We have a lot of strengths, from a culture of entrepreneurship and venture capitalism, to flexible labor markets and attracting immigrants,” notes Barry Eichengreen, an economist at the University of California, Berkley. “But we’re going to be living with the overhang of our financial and debt problems for a long, long time to come,” he tells the Times. JD

Contact me with news tips and story ideas at
joe@powersportsupdate.com or 952/893-6876.

 

 

 

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One Response to “2011 Doesn’t Look Much Better than 2010”

  1. DG Says:

    “Consider the situation as you build your 2011 business plan and as you stand in the voting booth next month.”
    If that’s a suggestion to vote GOP, I think we saw what 8 years of tax cuts, deregulation, unfunded invasions and artificially low interest rates achieved. But maybe we didn’t let Bush Jr. drive is into a deep enough ditch, so we should push the jalopy over a cliff?

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