Economic Rebound Won't Match Usual Recoveries

But Business-to-Business Press Might Help, American Business Media Members Are Told

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CHICAGO ( -- Economist Joseph Kasputys has given a dark outlook to members of American Business Media, the association of business-to-business media, in previous appearances at its gatherings during the Great Recession.

So are things looking up?

"I have a little bit better news," Mr. Kasputys said Monday at the association's Executive Forum in Chicago.

The operative phrase in that quote, however, is "a little bit."

Mr. Kasputys, chairman and founder of Global Insights, said the U.S. economy will experience slow growth of around 2.25% in 2011. He said that should rise to a still modest 3% in 2012.

A typical recovery after a typical recession starts very strong, with annual growth in the 5% to 7% range. But the Great Recession was not a typical recession. "It was a balance sheet recession, not a cyclical recession," Mr. Kasputys said.

Recoveries from financial collapses like this one tend to have longer, slower recovery cycles. "Usually it takes about four years for jobs to recover fully to where they were, and about six years for housing prices to recover," he said.

Right now U.S. companies are sitting on mountains of cash, hoarding reserves at near-record levels, but remain too cautious to spend it.

But the business media, because it brings buyers and sellers together, might be able to encourage at least some renewed corporate spending, Mr. Kasputys said. "Your mission at American Business Media is to get them to spend that money," he said.

Of course, consumers aren't spending much either. The consumer savings rate is approaching 7%, an unusually high number compared with recent decades, Mr. Kasputys said, calling it an "epidemic of U.S. thrift."

And high unemployment is continuing; 30% of the people who are unemployed have been out of a job for six months or more, Mr. Kasputys said.

The U.S. is risking inflation as well with its recent quantitative easing program, according to Mr. Kasputys, in which the Federal Reserve has committed to buying $600 billion in Treasury bills, a move meant to spur the economy.

While developed economies such as the U.S., Europe and Japan lag, faster growth is occurring in developing nations. But this growth has in it the potential for a double-dip recession, which Mr. Kasputys said is unlikely but nonetheless possible. As capital moves into these attractive economies, an asset bubble may be created. A Chinese real estate bubble, for example, appears to be developing.

"If that happens, we could see a double-dip recession," he said.

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Sean Callahan is executive editor, media business, at BtoB magazine.

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