Economists: 2011 Could Be the Year of Recovery

Why they're getting optimistic

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After a dismal 2010, in which the 2008 and 2009 recession was officially over but economic indicators from unemployment to housing remained poor, some economists are forecasting that 2011 will be the year that the U.S. economy finally comes back to life. Here's their case, what it means, why it could happen, and some pushback from more jaundiced sources. Whether or not these economists are right--and we hope they are--their optimism alone is a nice gift for the holiday season. Though the poor economy will make this Christmas a difficult one for many American families, perhaps this is a sign that next year's could be much better.

The government’s latest measures to bolster the economy have led many forecasters and policy makers to express new optimism that the recovery will gain substantial momentum in 2011. Economists in universities and on Wall Street have raised their growth projections for next year. Retail sales, industrial production and factory orders are on the upswing, and new claims for unemployment benefits are trending downward.
... Economists are increasingly upbeat about the outlook, saying that while the economy in 2011 will not be strong enough to drive unemployment down significantly, it should put the United States on its soundest footing since the financial crisis started an economic tailspin three years ago.
  • Wall Street at Most 'Bullish' Since 2004  The American Association of Individual Investor's Charles Rotblut writes, "Bullish sentiment, expectations that stock prices will rise over the next six months, rose 13.1 percentage points to 63.3% in the latest AAII Sentiment Survey. This is the highest level of optimism since November 18, 2004. This is also the 16th consecutive week that bullish sentiment has been above its historical average of 31%, the longest such streak since 2004."
  • Why The New Optimism?  The Atlantic's Derek Thompson explains, "Economic indicators like consumer spending and business investment followed their sluggish summer with a strong autumn, raising expectations for the recovery. Meanwhile in Washington, DC, a stand-off over the Bush tax cuts ended with a surprising deal that not only extended current rates but also added additional stimulus for the unemployed, for businesses looking to buy new equipment, and for middle class workers. New York investment banks immediately raised their growth expectations for next year by half a percentage point, and bond yields have steadily climbed."
  • Companies Already Planning to Boost Hiring  The Wall Street Journal's James Hagerty and Joe Light report, "Some big U.S. companies are cranking up their recruiting and advertising thousands of job openings, ranging from retail clerks and nurses to bank tellers and experts in cloud computing. Many of the new jobs are in retailing, accounting, consulting, health care, telecommunications and defense-related industries, according to data collected for The Wall Street Journal."
  • 9 Reasons It Might Not Happen  24/7 Wall Street's Douglas McIntyre pours on the cold water. Read all nine here. But his most worrying cases are for global instability -- in East Asia as Korean violence looms and in Europe as the ongoing debt crises evolve -- and for the housing market, which has been especially troubled in 2010 and has resisted several efforts at revival.
  • Will GOP 'Screw This Up'?  The Washington Monthly's Steve Benen does a bit of preemptive blame-shifting. "There's one other thing that gives me pause: congressional Republicans. What will/would a government shutdown do to the recovery? What about the international shockwaves of a GOP push not to raise the debt limit? Just how negative will the consequences be if/when Republicans slash spending, focus on deficit reduction instead of growth, and take billions out of the economy?"
This article is from the archive of our partner The Wire.