Where Is The Economy Going?

by: Adam Ballantyne

Let's beat around the bush and admit, with solid conviction, that we are still in a slump - a new recession 2.0, a "double dip," a stagnated economy, or whatever you want to call it. How do we know? Easy - unemployment remains around 9% nationally, still five years after our 2007 recession. Small, medium, and large companies are not hiring back large enough quantities of workers to jumpstart consumption (which ideally leads to the great spend-hire-spend more cycle), and many of these firms are still shedding their payrolls by large margins (Bank of America (NYSE:BAC), Best Buy (NYSE:BBY), USPS, Merck (NYSE:MRK), etc.).

The difficulty in all of this mess is coming to a conclusion on where the economy is going now. Unfortunately, there is no single answer, some of it will continue to improve, and some of it will continue to do poorly. However, there is reason to be more optimistic than the sky-is-falling roboskeptics. Sure, we still have loads of layoffs, a deteriorating (albeit nearly bottomed out) housing market, and 1% GDP growth, but we also have many industries that are doing much better than one would think in recessionary times; just don't judge them by their stock prices.

For reasons of government policy, national competitive advantage, niche specialty, or recession-"proofness", industries like healthcare, information technology, merchandising, environmental, and purchasing and management have continued to grow at a healthy pace despite the slumped economy. What we're doing, reluctantly, of course, and with a great deal of pain, is find a new niche in the global economy, one that isn't fueled by an overhyped internet boom (to drag us out of the mid 1990s recession), or fueled by a (way) overhyped housing/credit boom (to drag us out of the 2002 recession).

That's right, this one's going to hurt, and, God forbid we manage to create another artificial bubble, the US economy will take another 10-15 years to find a new technology- and information-based economy that will allow us to remain global leaders in at least a few things. Of course, we will still manufacture great cars, make bright lightbulbs, and innovate the hell out of everyday company processes, we just won't ever dominate these again, and we'll likely have to keep cutting costs by using foreign workers to keep our US firms more competitive.

To all of these problems, of course, there is great opportunity, both for entrepreneurs, workers, and investors alike. The companies that combine unique American advantages (such as information resourcing, consulting services, technological innovation, and logistics planning) with global demand (such as for high-tech information, cost-cutting practices, or new ideas in general) with be the next American success stories, whether these firms can be found in today's giants (Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG), ADP (NASDAQ:ADP), Chevron (NYSE:CVX), etc.) or in a new firm waiting to be discovered.

We take for granted how much people around the world still want to live here. There's more that's going to keep us going strong globally than just our manufacturing sector. Why do you think global millionaires keep buying up our houses? They want the American dream. At least they think it's still alive.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.