The Economy in 2011: Sluggish, but No Recession

As we end the year with an unemployment rate that's close to 10 percent, we have no choice but to focus on the future. Naturally, we hope that 2011 will bring better days to the United States, but the reality is that it probably won't.

Good News & Bad News

CNN Money reports good news that we probably won't slip back into a double-dip recession. While we won't see our country shrinking, we shouldn't expect to see much growth either. Drawing from the results of a monthly economist poll, Blue Chip Economics says that GDP will rise by 2.5 percent in 2011. This figure is lower than the long-term average, which is 3 percent. Minimal GDP growth means that the economy will not create enough jobs to meet labor force demands.

Historically, consumer spending and housing have operated as driving forces for economic recovery. CNN Money reports that in 2011, these two spending areas will be sluggish. Accounting for 70 percent of GDP, consumer spending is growing-- but not quickly enough.

The Reason Why?


People are scared about the country's job situation. Fear is motivating people to pay off debts quickly and save instead of spending. According to Mark Zandi of Moody's Analytics, this attitude probably won't change.

To help promote growth the Federal Reserve is positioned to add funds to the credit market to help decrease lending rates. According to economists, this strategy probably won't work. As a general rule, banks prefer to lend to individuals with a strong credit record. People in economic hardship have probably had trouble making payments to loans, credit cards, and bill collectors -- all factors that influence a person's credit.

The Key to Recovery

CNN Money implies that the key to economic recovery is in the hands of corporations. In 2010, these companies made substantial profits. As CNN puts it-- they "are now sitting on a pile of cash."

To put it bluntly, companies need to start hiring people. And paying them too.

So When Will Hiring Pick Up?

According to IHS Global Insight chief economist Nairman Behravesh, employers will accelerate their hiring efforts in the last quarter of 2011-- a year from now. Until then, we'll just have to watch, hope, and wait for more optimistic times. As it stands right now, nobody can foresee and end to these tough times.

The Politics

Over the last few years, people have been relying on economic bandages to hold their lives together. These have come in the form of health insurance subsidies, temporary jobs, and extended unemployment. With the current divided Congress, big decisions like these will be difficult to pass, especially if the economy falters over this next year.

Should We Be Afraid?

Quite the opposite. Instead, we should feel inspired to take action-- at the micro-level, if we can. Department managers: if you can make an argument for expanding your team, give it a try. Focus on growth so that we can expand opportunities for people who need jobs.

One key to recovery is employment growth, and it's up to everyone who can to innovate, thrive, and take action. Remember that projections aren't prophesy. Think of them as guides that set us in the "right" direction.

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