Yesterday, I had the opportunity to attend the SRP Economic Forecast for 2011 at the Arizona Biltmore resort in Phoenix. I have gone every year for the last several years and the speakers are always enlightening and quite accurate with their forecasts, even if the news is not positive.
The Arizona perspective and forecast was headed by Dr. Stephen Happel who is a Professor of Economics at Arizona State University. For the national and international perspective, Don Reynolds was back for the fourth year in a row and once again brought up some excellent points.
Overview of Dr. Happel’s Economic Forecast for Arizona for 2011
- Dr. Happel started off his talk with noting that all recessions eventually come to an end. This was prompted by recent media reports that had just come out declaring that recession had officially ended last year.
- The fundamentals that draw people to Arizona are still in place. Things like the wonderful climate, the beautiful scenery and the “western” feel are all still available.
- Some economic figures for Arizona are improving, while others continue to decline. We may see improvements in things like job growth and retail sales in 2011, but any growth is likely to be modest and still behind “normal” growth rates. He likened it a to tepid forecast for Greater Phoenix and cautioned we may still see negative numbers for things like wages and employment into 2011.
- In response to “Where is the Arizona economy going?,” the answer is unknown. Currently, there is tremendous uncertainty out there and until this uncertainty is resolved, companies and individuals are going to stay more or less in a holding pattern and curtail things like spending and growth.
- Arizona’s economic recovery is dependent upon the U.S. economy improving. To really see growth, Arizona needs more people moving here as they historically have. However, this is hard to do when these folks are unable to see their homes in other places in order to be able to make the move.
- Dr. Happel feels the odds of a double dip recession are about 50/50 right now. And, even if the second dip is not “official,” it may still feel like it since unemployment is not going to be resolved quickly and the housing issues are still in place.
Overview of Don Reynolds’ Economic Forecast for 2011
- Mr. Reynolds’ started off his presentation with the fact that we are in recovery. It is a genuine recovery, but it will be very slow. The trend is up and the worst is over.
- The United States is struggling with a “crisis of uncertainty.” Not only are we dealing with internal issues, but global uncertainties are also playing a part in the recovery.
- This uncertainty is causing a Catch-22 since corporations and individuals are holding back from things like spending, growth, expansion and new business ventures until they know what is happening. However, we need all these things to be happening to jump start the growth our economy needs. They key is to get the uncertainty gets resolved, otherwise the economy will continue to be pulled in too many directions.
- Some positive global signs seem to indicate that there will not be a double dip recession. China is seeing growth rates in the 9% range. India is poised for 7% growth and Latin America will post a strong 5.5% growth figures. In Europe, Germany has seen 9% growth over the last few months and England is somewhere in the 4% range. With a forecasted global economic output of 5.5% proposed for 2011, a double dip recession does not seem likely.
- Some factors that could have an impact going into 2011 – The expiration of the Bush tax cuts, the carbon tax, sovereign debt issues, inflation/deflation/stagflation, the new healthcare legislation, unemployment, housing and more.
- Driving new job growth and decreasing unemployment are huge issues to focus on. It could take 4-6 years to get us back to where we were job-wise.
- And, as alluded to before, the key to the recovery is to reduce the uncertainty and fear that is out there.
Overall, it was an enlightening event. And, it was nice to hear some positive news since the last few years have been eye-opening. The overall takeaways I left with are – we need to reduce the uncertainty out there in order to give people and companies the confidence to start spending and expanding again and that while we are officially in recovery mode, the recovery is going to be slow.