Every time I spoke to a group of credit union officials in 2010, I asked them (those who didn’t immediately rush for the exits) whether they believed the recession was over.
Typically, about two-thirds said the recession hadn’t ended, with the rest split between “don’t know” and “the recession is over.”
I’d then explain that this is another example of economists being way ahead of everyone else, because by our measures, the recession “officially” ended in June 2009 (not a typo). Of course, the committee of economists that dates recessions didn’t announce the trough until September 2010, but that’s a minor detail.
The reason most normal and reasonable people (noneconomists) didn’t buy this line is because the unemployment rate has remained stubbornly high.
Back in June 2009, the unemployment rate was 9.6%. It rose for the rest of the year—for three months at or above 10%. The rate fell only slightly during last year to its December reading of 9.4%.
Also, when economists say the recovery has begun, we mean just that—the economy is no longer shrinking and has begun to grow. If a decline is severe—as it was during the “Great Recession” of 2008-2009—it can take a long time for the economy to recover to anywhere near its pre-recession performance.
Throughout 2011, it’s very likely the general public will increasingly reach the conclusion that the light at the end of the tunnel is indeed growing brighter, and that it’s not an oncoming train. Labor market improvement will drive this turnaround in public perception and confidence.
CUNA’s economists expect 2 million to 2.5 million jobs to be added to the U.S. economy this year, and the unemployment rate will flirt with 9% by December.
Neither of these numbers is great (the economy lost 8.4 million jobs during 2008-2009), but they’ll be strong enough movements in the right direction for people to notice.
These factors will contribute to economic growth this year:
Conversely, the housing market should spend the year working through a very long bottom. Rising energy prices and potential weakness from the Eurozone could slow the recovery.
Overall, we’re still looking at a fairly fragile, moderately growing economy. But an upside surprise seems more likely than a significant decline in growth (a double-dip recession).
For credit unions, improving consumer confidence will be good news, because in 2010 credit unions experienced the first annual decline in loans outstanding since 1980.
CUNA’s economic and credit union forecast for this year includes:
Of course, all economic forecasts should be taken with a big helping of salt. Growing signs, however, point to a strengthening recovery