Recovery, Restructuring and Facing Reality
CHICAGO, April 12 /PRNewswire/ -- "We can either try to embrace where we are and make the best of what is left of our battered economy, or waste our days trying to turn back the hands of time and return to where we started, only to find that it would lead us right back to where we are today. We didn't get here by accident. We got here by design. It was only a matter of time before the imbalances that had grown all over the world would need to be rectified. We couldn't spend beyond our means without one day having to pay the piper. That day has come," says Diane Swonk, chief economist of Mesirow Financial, in her April edition of Themes on the Economy, located at http://www.mesirowfinancial.com/economics/swonk/themes/themes_0410.pdf .
In her April issue, Swonk takes a closer look at where we are, and the restructuring that needs to occur if we ever hope to deal with our debts. "Technically, the economy is expected to cross its previous high-water mark and transition from a 'recovery' to an 'expansion' in 2010," notes Swonk.
"For all practical purposes, however, the economy will still feel more like it is struggling to recover than entering an expansion. Indeed, almost all of the rebound in the level of inflation adjusted activity can be attributed to gains in one sector – health care, which only contracted in one quarter during the entire recession."
The Recovery
Nine Months and Counting: The recession appears to have hit a trough in June 2009, which means that we are already nine months into the recovery…Employment remains particularly subdued given the losses that we have endured over the last several years. Even the hiring for the 2010 U.S. Census has been a disappointment, as at least a portion of the temporary jobs being generated by the census are being snapped up by U.S. postal workers taking temporary leave rather than by the unemployed. |
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Implications for Unemployment and Inflation: The unemployment rate is expected to remain well above the 9 percent threshold in 2010, and above 8 percent in 2011. That is slightly lower than we were expecting to see over the course of the two years in earlier forecasts. The only reason for the "improvement," however, is that we now expect a larger number of workers to remain on the sidelines (or give up entirely) than we had previously thought. |
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Restructuring
The Next Phase: Over the long haul, the economy will have to undergo a fairly major restructuring if we ever hope to deal with the debts that we have incurred, let alone those that are likely to emerge going forward. The Baby Boom Generation, in particular, is coming of age and close to retiring, which will put enormous pressure on both Social Security and Medicare. |
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The Bottom Line: The restructuring that the economy needs has already begun, with consumer spending falling and investment and exports rising as a share of the economy in the fourth quarter. Moreover, those trends are expected to continue as we move from recovery into expansion. Even the Chinese appear willing to move a bit on their currency, which should help us rebalance our relationship and debts with them. |
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"The first step is always the hardest, and that means taking responsibility for what we have done and electing people who make the tough decisions to fix instead of ignore our problems. It also means acknowledging that the past was no panacea, as it led us here in the first place. We can't, nor should we, go back, but if we are willing to learn, we might emerge a little bit wiser for the wear," concludes Swonk.
The April issue of Themes on the Economy as well as archived issues can be found at mesirowfinancial.com.
Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with more than $37 billion in assets under management and 1,200 employees in locations across the country and in London. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit its Web site at mesirowfinancial.com.
SOURCE Mesirow Financial
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