Not Convinced

The "smart money" tends to dismiss the views of the great unwashed when it comes to economic and financial matters. When they hear that the majority of Americans are still cautious about the future, they assume that Mr. or Ms. Average Joe knows far less about the economy than your average stock trader does (even though, for instance, the great unwashed saw the recession coming before Wall Street did).

That said, at least some of those clever bulls must be uncomfortable with the fact that it isn't just the man on the street who remains wary. As U.S. News & World Report's Rick Newman notes in a post at his blog, the presumably plugged-in men (and women) in corporate America's executive suites are also feeling somewhat downbeat, despite all the good news that keeps reverberating out from the canyons of Wall Street:

Business leaders aren't convinced that an enduring recovery is underway—and they're the ones who decide whether to start hiring again, which is the most important step back toward a healthy economy. At a recent conference sponsored by the nonprofit Milken Institute in Los Angeles, dozens of executives, financiers, economists, and entrepreneurs expressed deep skepticism about a recovery built largely on government spending and companies doing more with less. "The economy is bifurcated into a strong and recovered corporate sector, and a weak and beleaguered consumer sector," says banking analyst Meredith Whitney. While a few things are going right, the people paid to anticipate future risks still see a lot of them. Here are 10 top worries, in the words of business leaders themselves:

Job growth is anemic. Employers are finally adding more jobs than they eliminate, on average, but the pace of job growth is far below what it will take to absorb 15 million unemployed Americans. And there's a good chance it could take longer for jobs to return than after any other recession since the 1930s. "If you don't have job creation you're not going to have this economy really growing," says Marc Lasry, CEO of investing firm Avenue Capital Group. "This economy is so dependent on consumers that you need job growth."

Consumers are tapped out. Spending has risen more than expected so far this year, but incomes haven't kept up, which means consumers will probably put their wallets away before long. "The American consumer is toast," says economist Stephen Roach of Morgan Stanley. He predicts that consumer spending, which peaked at 71 percent of GDP a few years ago, will drift back down toward a historical norm of about 66 percent. And if consumer spending doesn't propel economic growth, it's not clear what will. "Consumers are shell-shocked," adds John Engler, CEO of the National Association of Manufacturers. "They're not going to lead us back."

Housing is likely to stay depressed. The housing bust should finally end within a year or less, as prices in most cities stop falling. But foreclosures are still near record levels and it could be years before housing generates significant numbers of new jobs. "We're going to be bouncing along the bottom for awhile," says Donald Brownstein, CEO of investing firm Structured Portfolio Management. Once the housing market recovers, he expects prices to appreciate at about the rate of inflation, or a bit more. After past recessions, a strong housing market has typically been the catalyst that got the economy growing again. Not this time.

...

The economy is too dependent on the government. It's easy to forget that a huge chunk of the economy is functioning only because of government intervention. The insolvent housing agencies Fannie Mae and Freddie Mac, under federal conservatorship, back nearly 90 percent of all new mortgages, with a major assist from the Federal Reserve. The $787 billion stimulus program is a big reason why GDP has stopped falling and started growing. And government is one of just two sectors that have added jobs over the last two years. The government largesse eventually has to end, and strapped state and local governments could become job killers as they struggle with huge deficits and cut staff. "The government can't fix it all," says Patrik Edsparr, a top executive at Citadel Investment Group. "The question is can you phase it out without wrecking the whole house of cards."

...

No part of the economy is hot. Usually after a recession, there's rapid growth in one or two key sectors of the economy, which helps drag all the others out of the dumps. But this time, housing is moribund, growth in consumer spending seems unsustainable, and credit, the lifeblood of capitalism, remains scarce. "We all feel better, but what is driving the U.S. economy over the next two years other than the stimulus package?" wonders Marc Lasry. When the answer becomes clear, business leaders will start to cheer up.

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Comments

[Mad as hell]

People better wake up...the small guy has been pressed to pulp! There has been no recovery for them !!

April 30, 2010
BILL MOYERS:

Welcome to the Journal. Once upon a time, a whole lot of just plain Americans woke up to realize the economic system was working against them. They had believed in it; they worked hard to make it work for them. They knew its shortcomings but saw in it the way to a decent return for their labor and a better future for their families.

Then, one day, calamity struck: The system turned on them. And they discovered that they had been betrayed, bamboozled, by the people at the top.

But they didn't hang their heads and turn tail, like a dog whipped by its master. They organized and fought back — millions of them in a grass roots movement for democracy. What they did became known as the Populist Moment, an extraordinary time in our country's history.

http://www.pbs.org/moyers/journal/04302010/watch.html

[ForWhat]

Theres nothing we can do. They will do what they want. Just go with the flow.

[Truth Seekers - CLICK HERE!]

I stopped listening to the government when they said the market would be fine, about 2 weeks before it crashed in 08'. What a con job.

Interesting market action on friday. The bears came back in droves, and there is a head and shoulders pattern setting up in the market now >> http://bit.ly/dnNpWn

[Terrance]

US News and Report like other hoary media sources are dinosaurs far out of touch with changed times.

Heck, I never believed the utterances of a bow tied George Will back in the day, so it's not surprising that the current iteration of main stream journalists are viewed as hopeless shills of their corporate owners.

And that's exactly what they are.