While recovery indicators may be in place, ‘real people’ are still holding back
There are a lot of economists who are making predictions about the U.S. economy. But far more numerous are the millions of Americans whose everyday actions affect that economy.
And those Americans "are still complaining and cutting back," noted Robert Dederick, head of RGD Economics, in his annual address to clients and guest of Milwaukee Western Bank at the bank’s Oct. 31 Economic Outlook Breakfast.
From an economist’s perspective, the economy is experiencing a "recoverette," said Dederick. "But when I say we’re in a recovery, I’m speaking as an economist, and economists are not real people," he added in his customary light-hearted approach to the audience. "For us, a recovery starts when there are indicators of one. For real people, the standards are tougher."
So, like many other economists, views of the future are clouded by uncertainty. And that was pretty much the situation when Dederick addressed the bank’s audience last year, with the impact of the war on terrorism a huge unknown at that time. The economic climate was so unpredictable last year that Dederick suggested a call to self-proclaimed psychic Miss Cleo might provide as good of an outlook as a call to an economist.
Miss Cleo is out of business – courtesy of federal charges that she fleeced callers to her psychic hotline. And "I still don’t know" where the economy is headed, he said this year. "There is too much uncertainty, which is why we are having trouble coming out of this thing. We don’t know what our enemy is going to do to us; we don’t even know who they are."
And even if the US attacks Iraq and succeeds in replacing Saddam Hussein, Dederick asked, "What do we do with all the other members of the ‘Axis of Evil’?"
"That being the case, it’s very hard to know the economic outlook," he added. But he still offered a prediction – a prediction that things will improve.
"Times will get better; things are going to improve; they always do, otherwise, we’d still be in the recession of 1902 and all the recessions since then," he said. "And, there’s a war on. Did you ever hear of an economy that didn’t improve when there’s a war on?" But it’s a different kind of war now, and one with a focus enlarged from the time Dederick last spoke here. While the US is exercising what Dederick termed "Bush’s motto of ‘do unto others before they do unto us," the uncertainty of the mission is creating a drag on the economy.
"Money is not being invested in high-risk areas, it’s being put into low-interest accounts," he observed.
One positive is an indication that businesses are starting to spend, he added, saying government figures show an increase in business spending. "But the expansion won’t take off until capital spending does, and many people are saying ‘I have to wait.’"
Growth will come, but it will be "mediocre" growth, he predicted.
Health care and defense are two growth areas of the economy, he noted.
Nov. 22, 2002 Small Business Times, Milwaukee