What Does 2011 Hold? Economists Being More Cautious
WASHINGTON – If the economy has taught economists any lessons this year and last, it’s that you can’t hold onto any longstanding assumptions about economic or consumer behavior.
CUNA Chief Economist Bill Hampel said the current economy has established that anything can happen. “It does not mean we can’t see patterns and make assumptions. But understand that you will be less confident in your thinking that if A happens B follows. Now when A happens the thinking is B might follow.”
The notion that consumers aren’t really savers, a view widely held before 2008, is changing, noted Bill Handel, VP of research and development for Lombard, Ill.-based Raddon Financial Group. “For 40 years, from post World War II to the mid-1980s, the savings rate in the U.S. was consistently above 7%, averaging close to 8% to 9%. Then the rate began steadily declining, getting as low as 1% in 2007,” said Handel, attributing a good portion of the drop to consumers saving through real estate. “We are seeing the savings rate methodically climb and move into the 6% range.”
CUNA Mutual Group Chief Economist Dave Colby said economic and consumer uncertainties brought about during the last two years make it much more difficult for businesses to make their own forecasts and take action. “Huge uncertainties in the minds of business are deferring this recovery. What is an employee going to cost me? What will my tax rate be? Am I going to be taxed? If I don’t know what to expect, I do nothing.”