By Walter Crawford – Contributor
With 2010 producing grim to mediocre economic results consumers and investors alike are hopeful for stronger growth in 2011. The prospect of growth in the US economy depends on several leading indicators.
A leading indicator is an economic indicator that hints the future direction of the economy. Most analysts are predicting between 3.5-4% economic growth for the year versus a sluggish 3% in 2010.
The first indicator is tax cuts. Tax cuts negotiated between the Obama Administration and congressional republicans this past December will help the economy with a total $850 billion being pumped into the economy. Second, business investment is expected by analysts to increase by 10%, which is fairly significant given recent years decrease in spending. Third, consumer spending is expected to increase from 1.8% to 3%, which is modest but a good sign. Fourth, US exports are expected to grow to reach near 5% and potentially double over the next 5 years.
Such an increase in exports will be a challenging feat, yet offers the most promise for job creation and economic growth. Among these there are other more complex leading indicators which point to growth as well.
Still, the US economy won’t see substantial and sustainable economic growth until unemployment decreases and the housing market improves. Job creation is the primary issue, because people can’t purchase a home without a paycheck.
Since the start of the recession in 2007 8.75 million jobs were lost. Only 990,000 were created in 2010. This year it is expected that the unemployment rate may dip below 9% which is good but not excellent. As Ben Bernanke, Federal Reserve Board chairman, told the National Press Club this week, “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”