LAS VEGAS — The recovery banner has been waving on Wall Street for several months now as the stock markets charge ahead, but not everyone is buying.
Dave Colby, chief economist for CUNA Mutual Group, warned there is a possibility the GDP uptick in the third quarter was a "false reading" and the recession still has a year to go.
"This is a severe recession in terms of the number of months it has lasted and the dispersion, or depth in loss of jobs," he told attendees of the California and Nevada CU Leagues' Annual Meeting and Convention here. "And the timing and path of the recovery is very uncertain. We know it won't be a straight-line recovery, it will be bumping up and down. It will be a tough road for a while."
The upside? Flux in the banking industry, including 124 bank closures in 2009, means what Colby called a "tectonic shift in the financial landscape."
"People in credit unions have talked for years about 'leveling the playing field,' but this was much more. WaMu, a former competitor of many credit unions in California and Nevada, is gone."
Obstacles to a robust recovery are many, including low employment and gloomy consumer sentiment, which have combined to cause household to pull back drastically on spending.
"Anyone who tells you they are sure they know where the economy is headed-run for the hills," he declared, adding even if a recovery has started, it could be unplugged by any of a number of possible shocks in the coming months. "If you have a cold, you are more susceptible to pneumonia. The economy has a very bad cold right now."
Despite the glum possibilities, Colby said "difficult times are not an excuse to hunker down, they are an opportunity to do what credit unions have been doing for a long time. Credit unions have managed through 20 recessions over the past 100 years. They have always emerged from down cycles stronger and with more members-that's why they were invented. Credit unions are not going to stop evolving to meet members' needs."
Potential dangers to the future health of CUs lurk everywhere, Colby advised. He said massive re-regulation is coming, cuts to non-interest income are on the horizon, the specter of taxation is being raised by cash-hungry state and local governments, and there may be additional assessments to pay for the problems in the corporate network.
"If anyone believes everything will just go 'back to normal' in a couple months, they'll be wrong," he said. "'Normal' has changed."
