“Restoring 8.4 million jobs, many of them lost in manufacturing and construction sectors, will take a long time,” Connaughton said. “The recovery periods for recessions since 1982 have grown increasingly longer, extending to 49 months after the 2001 recession.”

Signs for positive recovery he identified include:

• Oil prices are not so high as to be a drag on the economy.
• New housing stock is beginning to be built, and the backlog of unsold homes is falling.
• The Stimulus Package is positive overall, but “only $300 million is true stimulus and not all of that has hit the streets.”
• Inflation is zero right now, which can keep interest rates low.
• The Trade Deficit has dropped from over $700 billion to about $380 billion in just 2 years, due to lower spending by American consumers.

However the noted economist and forecaster also sees signs of slow recovery:

• Consumer confidence is still low. Consumer purchases make up 70% of GDP, so this is a concern. Purchases of cars and light trucks dropped almost in half.
• The budget deficit is $1.5 trillion, 12% of GDP, and could rise to $19 trillion by 2017, exceeding 100% of GDP.
• The banking system is stockpiling excess reserves, as banks fear that the Federal Reserve will not be the “lender of last resort” if another crisis occurs. The Fed failed to save Wachovia and other institutions. Excess reserves have shot from $2 million in August 2008 to over $1.1 trillion. “The cost of that to the economy is devastating because that much money is not being lent out,” he said. This hurts small business and consumers who are not getting the credit needed to jump start the economy. Until a significant amount of that money hits the street and those with credit scores under 700 can borrow for cars, appliances and other consumer goods, the economy will stagnate.

Connaughton sees signs of recovery that will be slow. He cited GDP growth of 3.3 percent in figures released at the end of April as an important good sign.  Last month, 290,000 jobs were created. Unemployment figures may rise by summer as those who had given up looking for work re-enter the system with heightened expectations. But the banks must begin lending more for the economy to grow.

Dr. Connaughton’s visit was a collaboration of the Partnership’s semi-annual Investor Forums and the Chamber’s Economic Forum. Connaughton is a Professor of Economics and Director of the UNC-Charlotte Economics Forecast. He is a leading specialist in the fields of economic impact studies, regional economic forecasts, sports economics and the North Carolina economy.