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Inward Investment Guides

The U.S. Economy: Back from the Brink?

A year after the collapse of the U.S. economy, a number of experts are declaring that the recession is "technically" over. But don't start the celebration just yet.

Mark Crawford (Oct/Nov 09)
(page 2 of 2)
Late 2009 and Beyond
The bottom of the recession probably occurred in June. HIS Global Insights forecasts the GDP to grow about 2 percent through the first quarter of 2010: "We do not see employment rising until 2010. Credit conditions will stay tight and consumer spending sluggish. The unemployment rate will likely reach 10 percent."

"We have not seen a sustained high level of project opportunities through the third quarter of 2009, so it is not as if the troubles are over, nor are happy days here again," says Sweeney. "We expect a continued inconsistent, but slowly improving, market for capital projects and site selection through this year and into 2010."

Overall, Colson is cautiously optimistic about 2010. "From an activity level, more companies that were holding off are now conducting site analyses," he says. "Renewable energy companies and manufacturing industries that support data centers are doing well. Some companies are even expanding facilities. With greatly reduced construction and material costs, if you can mitigate risks, now is a great time to build."
NAM predictions are similar, projecting an upturn in manufacturing production gradually over the next year with more significant growth in the 2011-2014 period. The Labor Day report also projects that by 2014, the manufacturing sector will have regained more than 40 percent of the jobs lost during the current downturn.

However, NAM's guarded but optimistic outlook about increased manufacturing productivity does not take into consideration the economic implications of future policy changes. "There are grounds for optimism, but there is even greater reason for caution," says NAM President John Engler. "A recovery could stall out or even shift into reverse if Congress and the administration enact policies that increase the burden on businesses and make us less competitive in the global economy."

"There are about 5 million small businesses in the U.S., and roughly 10 percent of them create 80 percent of new jobs," says Berg. "Small business owners are vital to the national economy. Things like healthcare reform and cap and trade, if enacted, will add costs to our operations that will hinder economic recovery." Berg also believes that bank lending, although somewhat improved, will still take several years to recover because there are so many unknowns.

"Banks are still hurting and haven't worked through all their bad loans," says Berg. "The mortgage crisis has hit a hard bottom. But there is still a lot of pain for small businesses - banks are shutting them down by turning off their lines of credit. Then there is the problem of banks holding huge amounts of nonperforming commercial real estate loans - that bubble has yet to burst. I don't think the economy will be healthy until 2011, after banks have dealt with these problems and are interested in lending again."




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