Assessing the Economic Recovery Five Years and Counting, by Mesirow Financial
After a slowdown in economic growth during the first half of 2013, the economy is expected to pick up steam during the second half of 2013 and the first half of 2014. More importantly, growth will move above the 2.2 percent recovery average. This is according to Diane C. Swonk, chief economist and senior managing director, Mesirow Financial, writing in its recently published report, Assessing the Recovery: Five Years and Counting.
“We expect consumer spending to pick up, with persistent but not spectacular gains in employment and a slight improvement in the quality of jobs generated,” she stated. “Much of the recovery in jobs to date has been dominated by low-paid, part-time and contingent work. We see a higher percentage of employment gains coming from manufacturing and construction activity, particularly as we move into 2014.”
According to the report, another plus for the economy is better access to credit for consumers. Swonk reported that older households including home owners are doing particularly well: they have either eased their debt via mortgage refinancing and/or seen a fairly rapid rebound in the value of their homes.
“Indeed, the wealth effects tied to housing and the stock market are not insignificant, especially when it comes to big-ticket purchases such as vehicles, appliances and furniture,” she continued. “Separately, an ongoing recovery in the housing market should lead to additional spending. However, the push to flip homes to rent instead of own, coupled with a shortfall in first-time buyers due to the consumer debt overhang, has limited the multipliers (spillover effects) from housing activity onto other spending. Buyers flipping to rent do not put high-end appliances and finishes into homes to be used as rentals.”
Compared with older buyers, younger spenders tend to rely on credit and leverage their incomes to make purchases; they can’t do that if they lack the earning potential and/or if they can’t access credit as they once could. The result is the bifurcation of income and spending at the highest and lowest income quintiles and an ongoing hollowing out of the middle, according to the report.
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