Tuesday, December 21, 2010

As End of the Year Nears, Economic Uncertainty Persists




The economy began began recovering in 2010 from the deepest recession since the 1930s, but that recovery seemed to go in fits and spurts with no clear trajectory.
As for 2011, expect more growth but with a continued pattern of uncertainty, said Bill Schaniel, an economist with the University of West Georgia.
"This year will be a year that will be remembered as being both not as good as some hoped -- there was no significant reduction in the unemployment rate -- but not as bad as many feared, as there was no double dip in the recession," Schaniel said. "This year did see the technical end of the recession, but for most people the recession will end when there is significant job growth," he said.
In 2010, the economy grew at a steady rate in the January-March quarter. But, those gains were achieved largely from businesses replenishing stockpiles that they had allowed to become depleted during the recession. That first-quarter pace of growth couldn't be sustained.
The effects of the $814 billion government stimulus program subsided. Consumer spending was tepid, as was hiring by businesses. City and state governments were forced to cut payrolls. All of those factors contributed to slower growth in the third and fourth quarters of the year.
Joblessness remained chronically high, with more than 15 million Americans still unemployed. The Federal Reserve unveiled a plan to purchase $600 billion in Treasury bonds to try to reduce interest rates, boost stocks and spur consumer spending.
At year's end, manufacturing is up, consumer spending is rising and Congress has passed $858 billion in tax cuts and unemployment insurance extensions.
All of this leaves an economic picture that remains murky but offers some hope.
"Most economists are optimistic about 2011," Schaniel said. "The forecasts for slow but steady job growth in 2011 will provide some relief for the falling home prices and the federal deficit. As long as there is positive job creation, 2011 will be a much better year than 2010. The rate of job growth will define whether it is a decent year, a good year or a great year for the economy."

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