Economy gaining traction
New economic structure to emerge in wake of recession
Economic indicators show the U.S. economy bottoming out and starting to grow in the next six months, said Bill Greiner, executive vice president, chief investment officer and manager for the Trust Investment Division of UMB, Kansas City, Mo. Greiner spoke June 1 during the American Architectural Manufacturers Association National Summer Conference 2009 in Minneapolis.
“We think the economy is gaining traction. When you have this meeting next year, you’re going to be in a much better mood,” Greiner said. “For the time being, the worst is probably behind us.”
Greiner described this downturn as a structural recession. “The economy coming out [of the recession] is going to look different,” he said. “It’s our view that savings rates are going to rise back to where they were historically. … Interest rates will also be rising over the next 10 years, but not necessarily dramatically.
“Don’t be alarmed. We are going to see a change in the way the economy functions, but it’s not necessarily going to lead to a weak environment. It will be an investment approach,” Greiner said.
The housing market should also rebound in the near future, he said. The housing affordability index is at its highest point since 1970. “As housing become cheap enough, sales will gain traction. Inventory levels will start to correct,” he said. “A year from now, the housing market will be much more vibrant, maybe not in housing value, but in housing starts.”
Unemployment will likely peak in the fourth quarter, and consumer spending is likely to pick up. “People are under the impression that the worst is behind us,” Greiner said.
Greiner said that the U.S. economy won’t be out of the woods once the recession ends. He predicts that the federal debt structure—the large amount of debt the government has taken on—is going to create possibly major issues in the economy during the next several years, including the possibility of inflation and a fall in currency value.
“We need noninflationary economic growth to avoid major problems. We can’t afford to see employment shrink,” he said. Employees will need to work longer and smarter to avoid severe economic problems, he said.