SAN DIEGO - Despite all the chatter about a recession, several economic experts said it looks like this could be the recession that wasn’t.
That’s because while no one argues that the nation’s economy is in a downturn, the formal economic definition of a recession is two consecutive quarters of negative growth–and it doesn’t look like that’s going to happen, after all, according to the experts who spoke at WesCorp’s Future Forum here last week.
One of the reasons we may have a near miss on a technical recession: those economic stimulus checks that have been landing in some consumers’ mailboxes, according to Joe LaVorgna, chief U.S. economist in charge of global markets research for Deutsche Bank, who said he foresees negative growth for the second (current) quarter of 2008, followed by a “rebate boom” in the third quarter as consumers spend their economic stimulus checks.
“I don’t see the economy going into a deep free fall,” he said. “Real estate has been in a recession for two years, and it can only go so far.”
LaVorgna sounded a warning about consumer spending: he said it has reached a historically high percentage of GDP–70%–but consumers are suffering on several fronts, which could negatively impact the economy.
“Consumer spending is still trending downward,” he noted. “Household buying power is significantly diminished, especially by falling homeowner equity.”
Todd Buchholz, managing director of the $15 billion Tiger hedge fund and former director of economic policy at the White House, said this is a “painful economic time,” but added it is a time for teamwork, not trench warfare. He said people want solutions, and credit unions can be part of an upswing.
“When your members come in, they don’t just want a CD, they want help. Understanding financial instruments today is like drinking from a fire hydrant. Your members want to know how they can save for retirement,” he said.
One element holding the economy together, according to Buchholz, is the job market. He said pink slips are not going out as fast as in previous slowdowns for two reasons: good workers are hard to find as baby boomers retire, and, companies have sufficient cash on hand.
In other news out of Future Forum, WesCorp officials said the corporate reported its “strongest year to date, with total assets of $31.6 billion.”
The corporate CU, based in San Dimas, Calif., said net interest income increased 47% on the year to $157.6 million. It added 27 new CU members during 2007 to boost its total to 1,055 credit unions in 44 states plus Guam.
Bob Siravo, WesCorp’s president and CEO, said, “Our financials are super-strong, the strongest year we’ve ever had.”
