What Can Consumers Expect in 2010?

Pick up any newspaper right now and there is plenty of discussion about the economic recovery being underway. But many consumers have a hard time understanding that a recovery is in progress as they wonder if they will have a job by the time unemployment benefits run out.

What recovery?

Statistically speaking there is a recovery in progress. Government officials reported that the U.S. economy has grown by 5.7 percent on an annualized basis during the fourth quarter of 2009. That rate more than doubled the third quarter 2009 rate which was at 2.2 percent.

For consumers though the question concerns when the growth in the Gross Domestic Product (GDP) will equate to new job creation. With the U.S. unemployment rate at a staggering 10 percent, millions of Americans are looking for work. In fact, the 10 percent rate does not even include those who are under-employed and those who have quit looking for work all together. Add those people into the equation and unemployment actually approaches 18 percent or higher.

So when will the expanding economy actually benefit consumers? Unfortunately economists believe the high GDP growth rate in the fourth quarter was a perfect storm of one-time factors. These factors include restocking of inventories at the start of a new year and government stimulus spending.

Both of these factors are temporary and when activity ends…so will GDP expansion for the most part. What is not known is how much these two factors contributed to the 5.7 percent.

What this all means for consumers is that new job creation is expected to remain slow. In fact, many economists are predicting the economy will be in an upswing through the middle of the year and then fall back. As long as businesses believe expansion is temporary, they are not going to add employees to their payrolls. It is really as simple as that in terms of jobs.

If consumers don’t find jobs and credit stays tight the economy is not going to rebound. That is also a simple fact. Consumers must spend in order for the economy to improve. Not all economists believe the economy will stall though. Some believe it will continue to grow through 2010 as long as the government does not do anything to throw a monkey wrench into the works.

Currently, interest rates are expected to remain low. And the government has introduced a new program to give businesses a $5,000 tax credit for each new employee added. Small businesses are key to job growth.

Unfortunately, in order to generate the hundreds of thousands of new jobs needed each month, to recover from a loss of over 7 million, the economy needs to grow at a fairly fast pace. But predictions are that GDP expansion will grow at 3 percent or less and that is not enough.

So in 2010 consumers face more of the same – the same being continued high unemployment and tight credit – for at least another 6 months and maybe longer. That is not news the unemployed want to hear, but it is the unvarnished truth.

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