General Economy Improving, Says Leading Economist At Technomic Conference

In the opening presentation of the Technomic Restaurants 2010 conference, Paul Kasriel, chief economist for Northern Trust (and whose family owned a foodservice equipment dealership) offered some hope. "The economy has begun to hit on all cylinders," he joked, "but without much compression. Still, there is every reason to believe that the U.S. economy will grow this year and
next."

He discounted the danger of the European credit crunch, noting Greece, Portugal and Spain account for less than 4% of the global economy while China, India and Brazil control 12.6%. The economies in the latter countries continue to grow robustly. And nearly all the growth in U.S. exports in the past year has gone to "non-Japan Asia and Latin America."

On another positive note, he said "only about 40% of the federal stimulus" approved last year has in fact been spent to date. "You’re seeing a tremendous amount of infrastructure building" this year, he said, noting all the work is keeping tens of thousands employed.

Still, the U.S. economy is structurally changing, moving towards exports and business spending and moving away from discretionary consumer spending and housing. This is likely to be a slow, painful process which has already led to significant structural dislocation, particularly in the automobile, housing construction, and financial sectors. "Many who were working in these sectors will have to retrain and find other ways to make a living," he said

The most crippled sector of the U.S. economy remains the financial sector, he said. Credit is likely to remain tight as new financial rules (close to passage as we went to press) and the danger of continuing loan losses on commercial real estate lead financial institutions to hold on to or build their reserves, rather than lending to businesses or consumers.