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Jan 22, 201309:00 AMThe Bottom Line

with contributors from Associated Bank

A ‘solid’ performance review for the economy

A ‘solid’ performance review for the economy

(page 1 of 2)

It’s employee review time. Need we remind you? It’s becoming a more difficult process, especially when you try to blend the world of “everyone is a winner” with the world of “see you in court.” But I’m here to give the U.S. economy its annual performance review. And in a word, it’s “solid.”

It is not outstanding, but neither is it worthy of being kicked out the door. In many economists’ minds, the U.S. economy is not meeting expectations, but some of those expectations need to be lowered. While lowering our standards can often lead to unpleasant results, I am simply suggesting a dose of reality. The U.S. economy is the biggest and the most productive in the world, but today’s economy should not necessarily be judged by its past. The law of large numbers alone suggests it can’t (or shouldn’t) grow as fast as it did before.

We estimate that the U.S. economy is going to register growth of about 2.5% in 2013. This is a welcome place to be. It means our economy will approach $17 trillion at the end of the year. It suggests job growth will make a dent in the nation’s underemployment rate. Inflation will remain contained. Interest rates will remain low.

We must question policies designed to artificially inflate the economy to levels corresponding to outdated standards. However, these policies may result in stronger short-term economic growth. Our review may move from “solid” to “exceeds expectations.” Perhaps even to “outstanding.” But we will walk right back into the world of false prophets. Uncomfortable unintended consequences will prevail. Inflation. Rising interest rates. Falling productivity.

So what should you do? Stick to your knitting. If you are one of the unlucky ones whose real estate’s value is still 25% below the peak years, focus on effective and efficient asset management.

Invest in yourself and your business. Take a class – Wisconsin is home to a bountiful higher education buffet. Open yourself to the reality of globalization. All of us are going to continue to interact with people from different lands. Embrace this fact. How can your business profit from this by providing a service or product these folks need? Be open to new ideas.

How do these admonishments translate to your investment portfolio? Very similarly. For one thing, keep investing. By that I mean, continue to build that investment account. Save more. Work a bit longer. You’re probably going to live a long time.

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