FIND OUT HOW AT WWW.GETARESWAREDEMO.COM The Economy 3 Jobs, consumer spending key to recovery

Dr. Carter Murdoch answered questions about market recovery like any good economist would, during his keynote address at the 2008 National Settlement Services Summit. He said, “It depends.” The complex chain of events the Bank of America compliance and marketing executive contemplated in his 2008 address are still weaving their spell over the U.S. economy.

What Murdoch told the summit noting that the issue is not whether the federal stimulus package, particularly attendees back in 2008 was that recession is over, but whether the the construction components, is not recovery depends on a complex chain economy can generate the growth expected to be felt until 2010.” of events that involves a delicate necessary to put many of the balance between actions by the Fed, the unemployed back to work again. A conservative growth phase may not value of the dollar internationally, be all bad, however. Fazzari’s research investor confidence, reduction in “In the deep downturns of the 1970s has shown that the consumer spending housing stock, overall health of the job and early 1980s, strong consumer that pulled us out of recent downturns market, the possibility of recession, the spending growth led to strong was not “real” in the sense that the threat of inflation, and, ultimately, the recoveries. Unfortunately, I just don’t consumption was largely done via potential of pent-up demand unleashing see it happening this time.” Fazzari plastic. While the spending spree as consumer confidence builds back up. said. “I continue to worry that the looked good on paper, the underlying household sector cannot support growth household debt proved to be a house of We now know that the value of the over the next few years the way it did cards that came tumbling down in the dollar fell, investor confidence crashed, before the recession.” global economic crisis of 2008. housing stock increased, the job market tanked, and the Great Recession With consumer spending accounting Nobody seems eager to return to that became an ugly reality. for 70 percent of GDP, he considers it a kind of faux economic growth. So “matter of arithmetic” that the economy what’s ahead? The Kelley School of While some economists have already will stagnate over the next few years if Business predicts the following for declared an end to the recession, American households curtail their 2010: economists are united in their belief spending and borrowing to repair their • The housing market will show some that the economy will not come roaring balance sheets. growth; but, like the overall economy, back, but will more likely experience it will be muted. Home prices are conservative growth, with a slow return The Mortgage Bankers Association expected to rise slowly in most to full employment. (MBA) sees the problem through the markets. same lens. • Interest rates will rise slightly but The Indiana University (IU) Kelley remain low by historical standards, School of Business’ annual Business “The recession is behind us but the with some upward pressure possible Outlook Panel released their annual effects of the recession will linger for late in the year. report, noting that 2010 is going to be some time in the form of higher • Energy prices will be higher than in better than 2009, but that 2009 was unemployment and lower levels of 2009, but will remain far below the “awful.” business investment and home peak reached in 2008. construction. One of the big questions • Business profits in most sectors will “Better is not necessarily good,” said regarding growth will be the behavior hold up due to major cost cutting that Bill Witte, associate professor emeritus of consumers. The large losses of has occurred. The big gains in the stock of economics at IU. “2010 is going to consumer wealth in the form of reduced market have already taken place; stock be acceptable, except for the fact that home values and stock market losses, prices will