Bloomberg.com is reporting that confidence in the world economy rose for a third month in June, U.S. payroll losses slowed down and global production improved.  These are being considered signs indicating the worst of the economic crisis may be over. While pessimists still outnumber optimists according to the Bloomberg study we are seeing the highest level of consumer confidence since November 2007!  That’s promising news.

What’s also promising is that while the current economic situation has created troubles for areas all around the globe, the Peoria region continues to fare better than many and continues to drive forward not letting the recession take hold and destroy the diversified economic base that has held the region together for decades.

We decided to sit down with Dr. Joshua Lewer, a Bradley University Economist, to evaluate where we are today.  We met with him in December for a comprehensive look at what he expected to happen during this recession and we thought it was time to see if his predictions were still holding true.

When we began this economic climate campaign in December 2008 a survey of the National Association of Business Economists forecasted the recession would deepen in the first half of the year, we would see a modest pickup in the second half of 2009, followed by a slow but solid recovery in 2010.  Dr. Lewer says that expectation has not changed.   

He told us to keep an eye on unemployment numbers because they would rise and fall over the course of the recession.  This spring that has been the case; we saw 9.1% unemployment in February, 8.9% in March and back up to 9.2% for the Tri-County Region in April.  Dr. Lewer says those numbers lag behind economic activity meaning we could still see unemployment numbers increase after the recession is technically considered over.

Dr. Lewer says on a good note, we are no longer in free fall, instead we are seeing a bottom out process.  He says what we are experiencing now is similar to what we saw in 1991 and 1981 as we were starting a recovery.  Lewer urges you to look at the recession as a graph, “We hoped for a sharp ‘v’ indicating a quick bounce up from the bottom but instead this is more of a ‘u’ shaped situation where we stay at the bottom for a while then slowly start to rise back up.  I can’t say we’ve reached an inflection point yet, we'll know in a few months. But we are in much better shape than we were in December.”

Last week’s Excelerate Newsletter looked at what local industries needed to see in order to believe there was a recovery on the horizon and Dr. Lewer agrees with many of the statements gathered and believes we are seeing some encouraging signs today.  In December, Dr. Lewer identified several general factors he believed would lead to a recovery, including the thawing of the financial markets, expansionary fiscal and monetary policy, lower commodity prices, and the yield curve moving into "recovery zone" territory. “Current interest rate spreads are coming down, the yield curve showing recovery, mortgage backed securities being bought and sold again, and capitalization rates have improved.  These are all indicators that we are going to come out of this recession.”  He indicated that we still need to keep an eye on the GDP.  “We are not going to see what we’re used to seeing in the next couple years.  Our GDP growth rate will be around 1% not the 3% we’re used to.”  With that said Lewer is hopeful that the financial industry is on the mend.

Dr. Lewer reminds us that recessions are dictated by psychological influences of the human psyche.  “This is a fear driven recession as I have mentioned before, but it’s starting to subside.  The volatility index skyrocketed early on and it’s coming back down now. This means fears are abating.”

Lewer also reminded us to watch for some behavioral changes in people when we come out of the recession, especially when it comes to spending habits. “It’s the new vogue.  People are saying I don’t need the luxury goods, the necessity goods are what I need.”  He says when you have a recession this deep and difficult you’re bound to see behavioral changes in people.  Another example is our personal savings rate.  “It has steadily risen from 1 to 5% in the US.  However, the typical savings average outside this country is somewhere around 8-10% so we still have a ways to go but that shows a serious change in consumer behavior.”

Lewer says we’re moving in the right direction but the recovery is going to be slower than we want. He encourages everyone to remain patient and continue working together to ease fears.  He says “We’ll get through this and when we come out on the other side, we’ll be stronger.”