November Economic Update

Reflecting on his party’s losses at the November 2 polls,President Barack Obama offered that “... first and foremost, it wasa referendum on the economy.” While the recession has been over formore than a year by the official tally, the President’s assessmentconveys that the return to growth has been lackluster thus far. Inspite of unprecedented steps to stimulate activity, theforward-looking outlook is both qualified and opaque. In fact, theunusual degree of uncertainty in the economic projections is, inpart, a result of the simulative steps themselves. Questions aboutthe sunset of current policies and issues such as tax rates act asdrags on consumers’ and businesses’ willingness to make significantor long-term investments.

Will the growth trend accelerate in 2011? The current consensusdiscounts that scenario. The Economist poll, for example,anticipates that US GDP growth will slow from 2.6 percent in 2010to 2.3 percent next year. The Conference Board is more reserved,projecting that growth will slow to just 1.2 percent as the impactof government stimulus programs wanes. Very weak conditions inhousing markets and an absence of stronger wage-income increaseswill limit consumers’ capacity to step into the role of growthdriver.