Management

Bank Economists Predict Moderate, Sustained Recovery

June 30, 2010
KEYWORDS economy , rates
/ PRINT / ShareShare / Text Size +

The economy is on a moderate but solid recovery path and sustainable private sector job growth has returned this year, according to the Economic Advisory Committee of the American Bankers Association.

The committee unanimously noted that a double-dip recession in the U.S. is unlikely. More than 500,000 private industry jobs were created during the first five months of this year, and the committee foresees the creation of 2.2 million new jobs in 2010 and another 2.5 million new jobs in 2011.

The committee noted that private sector employment growth is crucial for self-sustaining economic expansion, as is consumer spending—people are reluctant to spend when they’re concerned about their jobs.

According to the bank economists, consumer spending was a major drag on the economy in 2008-2009, but will grow by roughly 3% this year and next. Increased consumer spending coupled with strong business capital equipment spending will create real GDP annual growth of just over 3% through 2011, the group predicts.

The group also expects the national unemployment rate to drop steadily but slowly, from 9.7% in May to 8.5% at the end of next year.

The committee consensus is that consumer price inflation will slow to nearly 1% this year and rise to just 1.8% in 2011.

The group unanimously expects the Federal Reserve to start raising interest rates at some point in 2011. The committee consensus is that the federal funds rate, which is now below the 0.25% ceiling of the current Fed target range, will rise to a median estimate of 1% by this time next year and 1.5% by year-end 2011.

The move by the Fed toward a less accommodative monetary policy will push other interest rates modestly higher, according to the bank economists. The three-month Treasury bill yield is expected to rise from 0.08% at present to a median estimate of 1% in December 2010 and 1.8% the following December.

The 10-year Treasury and 30-year fixed-rate mortgage rates are expected to rise by just over one percentage point by year-end 2011, to 4.40% and 6.15%, respectively.

The group sees limited adverse impact on the American economy from turmoil in European sovereign debt. According to the bank economists, the backstop provided by European leaders for near-term financing of their deeply indebted nations will help restore market confidence and contain financial market instability.

The negative impact of economic weakness in Europe on the U.S. economy will be mostly offset by lower Treasury and fixed mortgage interest rates, and commodity prices. According to the committee, “the most notable effect on the U.S. will be lower U.S. exports globally due to a weakening European economy and a strengthening dollar.”

Post a comment to this story

heroes

What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive