Last Updated:
June 19, 2010
California Real Estate
THE ECONOMY
Relapse into recession isn’t likely. Odds are worries about Europe’s woes infecting the U.S. will recede by year-end as policymakers there do whatever it takes to prevent a meltdown. For most U.S. industries and businesses, however… Regaining the robust economic health of a few years ago is still far off.
This week’s Letter is a special look at the state of the economy as a whole and at key American industries. We’ll assess how much further there is to go before recovery is complete and how much longer it’ll take to get there.
Start with GDP growth of about 3.5% this year. And the same next…a decent gain and better than the U.S. saw in the last two recoveries, in 1991 and 2002. Still, it’s far from the 6.3% average growth racked up in post-recession periods since World War II.
Helping to drive the growth: Lean inventories, as businesses, which underestimated the rebound, are forced to restock factory bins and store shelves. Business spending on equipment & software…fueled by rising profit margins, technology innovations, easing credit and business’s huge cash reserves.
Continued federal stimulus this year, though it scales back sharply in 2011. A pickup in employment and income. Extraordinary productivity gains over the past year have let firms expand output with minimal hiring. But that path will peter out, and employers will have to add to payrolls to lift production even more. Meanwhile, workers who have jobs are bringing home paychecks that stretch farther. Real hourly wages…measured after wringing out the effect of a big energy price drop…have climbed 3.5% since Aug. 2007. With inflation likely to remain tame, the erosion in real wages that usually comes with high unemployment will continue to be offset.
And rock-bottom interest rates. With the Federal Reserve more worried about deflation than the opposite, it will keep interest rates at record lows into next year.
Also playing roles: Rising consumer confidence. The Univ. of Michigan’s monthly reading is inching up, nearing the halfway point between the prerecession mark of 97 and the dismal 55 it hit during the financial crisis. And consumers’ recovering sense of wealth. Even after accounting for recent market corrections, the S&P 500 is up about 60% from its early 2009 low. And Americans’ household net worth is up $3.5 trillion from a year ago and $5.8 trillion from its recession low.
- Menifee Homes - Menifee CA Homes For Sale - Re/Max Elite Team, Lake Elsinore, California real estate listings, homes for sale. Your Lake Elsinore California real estate resource center, find mls listings, condos and homes for sale in Lake Elsinore California.