Economist Identifies Four Key Factors Influencing Growth

If the United States addresses “in a coherent manner” four key issues that impact the economy—employment, consumer behavior, global economic strain and the role of politicians—the country can expect growth of approximately 3 percent in 2012, forecasts an economist for a manufacturing industry trade group. “If not, the United States will wallow in the 1 to 1.5 percent territory, with all that implies,” says Dr.

Although high unemployment is a top concern among Americans, boosting hiring will take “far more” than economic recovery, Mr. Kuehl says. He identifies three key problems in this area: many job seekers lack the skills needed to return to the workforce; those who have the skills find it difficult to get to where the work is; and employers that are expanding would rather invest in machines than people.

As for consumer behavior, Mr. Kuehl notes that Americans are saving more and deleveraging, as evidenced by declines in credit card use and in taking larger loans. However, most analysts expect this trend to reverse itself, he notes. “As soon as the pressures of unemployment recede somewhat and there is hope of rebound in the housing sector, the consumer may start to return to near normal,” he says. “This is the key—near normal, not the crazed consumer of the last decade gobbling up every tiny luxury he could find. The ‘normal’ consumer is the one we saw in the 1980s and 1990s.”

A weakening dollar has made the United States a more aggressive export nation, and that’s good for the country’s economic prospects, Dr. Kuehl says. However, the downside of that is that the United States is far more sensitive to economic activity in other nations than it has been in the past, and that could affect prospects for this year. Examples from 2011 include the crisis in Europe, which is still ongoing, as well as the earthquake in Japan, which caused drops of about 1 percent in U.S. GDP, 5 percent in Japanese GDP and nearly 2 percent for world GDP.

Finally, Mr. Kuehl says the role of political players could be “the most pressing issue of all” in shaping the U.S. economy in 2012. For more than three years, the world’s central banks have been trying to address economic difficulties with interest rates, quantititative easing and the like, but have done all they can. Meanwhile, politicians are trying to stimulate the economy at the same time they address deficits and debt. “The problem is that fixing one makes the other worse,” Mr. Kuehl says. “To get out of a recession, a government lowers taxes and increases spending. To get out of debt, it raises taxes and cutts spending. Rather than make a choice, the leaders in Europe and the United States try to do both simultaneously, and the whole system stalls.”

For more information from the Fabricators & Manufacturers Association, visit fmanet.org.