PERSONAL . BUSINESS . SPECIALTY BANKING SERVICES . THE PROACTIVE BANK . CONTACT US
.
PERSONAL ACCOUNT LOG-IN

User ID:  
Password:

Enroll Now | Forgot Password?
BUSINESS ACCOUNT LOG-IN

Company ID:  
User ID:  
Password:

Forgot Password?
TREASURY GATEWAY

Enter Here
ATM & BRANCH LOCATOR:


arrowVectra Bank Media Room
arrowStrength and Stability of Vectra Bank
arrowPolicies and Terms
arrowZions Fact Sheet
arrowContact Us

Apply now for a Business Basics Checking Account!


Apply now for a Business Interest Checking Account!


Apply now for a Business Loan!


Vectra Bank Expert Jeff Thredgold

Colorado Economic Outlook Summer 2010

Written by Jeff Thredgold, President, Thredgold Economic Associates

The U.S. Economy
…a three quarter stretch

The American economy has now registered reasonable growth for three straight quarters, following four straight quarters of decline. Constraining a more impressive economic growth rate are sluggish residential and commercial real estate valuations and soft demand, historically high unemployment, and consumer anxiety about ever-expanding government and mind–boggling budget deficits.

A 2.7% real (inflation adjusted) annual growth rate during 2010’s first quarter is slightly weaker than the consensus view of forecasting economists for growth over the balance of the year. Numerous forecasts have been downgraded slightly in recent weeks, tied to European financial challenges.

Before the end of the year, the National Bureau of Economic Research (NBER), the official scorekeeper for the U.S. economy, is likely to determine that the Great Recession ended sometime between June and September of 2009. The Great Recession, which started in December 2007, will be the longest, deepest, most painful, most costly and most pervasive recession since the Great Depression.

us real gdp

Deficit Spending
…simply too much borrowing

Financial realities tied to the Great Recession, combined with aggressive spending by both the Bush and Obama Administrations to stabilize the economy, contributed to a budget deficit of $1.4 trillion during fiscal year 2009, which ended last September 30, easily the largest on record. A comparable deficit is likely this fiscal year. Since few minds can comprehend such enormous numbers, think instead of a budget deficit averaging $160,000,000 EVERY 60 minutes.

Perhaps the greatest challenge to be dealt with over the next 12–24 months is how to reduce estimated deficits averaging $1 trillion annually during the next eight years, which are simply unaffordable. Global financial anxiety about irresponsibly high budget deficits across southern Europe must be a wake–up call to the U.S. Congress as well.

Mid–Term Elections
…the curse of incumbency?
Republicans expect to pick up substantial numbers of seats in the U.S. Congress in November’s elections. More optimistic forecasts even suggest the Republicans could gain control of the House of Representatives.

It is typical for the party out of control in Washington to strengthen its hand in such elections. The major departure from the past is likely to be the surprising number of long-term incumbents from both parties who could be sent home. Voters have clearly tired of the childish behavior to be found on both sides of the aisle in the nation’s capital. Critical long–term issues simply must be addressed in a bipartisan fashion…and sooner rather than later.

Unemployment
…job challenges for millions

For the first time since the Great Depression, total job losses during a recession wiped out total employment gains during the prior expansion. More than eight million people lost jobs during 2008 and 2009, with millions more shifted involuntarily to part-time employment. Much better news finds the net addition of roughly one million jobs so far in 2010, with perhaps another million more to come prior to year-end.

The nation’s unemployment rate, averaging 9.8% over the past six months, is likely to remain above 9.0% during the next 12 months, even as job gains have returned. Why? As more evidence of job availability becomes widespread, hundreds of thousands of people who formerly left the labor force will continue to return…and unless and until they find a job, they will be counted as unemployed.

US unemployment rate

Inflation
…a 44-year low

Consumer inflation remains under control, with the Consumer Price Index rising 2.2% during the most recent 12-month period. The increase compares to the 2.3% average annual rise during 2006 to 2009. In addition, “core” consumer prices (which exclude food and energy costs) rose only 0.9% during the most recent 12–month period, the smallest rise in 44 years.

Where we go from here remains the subject of intense debate. One view sees major inflation pressures about to unfold, resulting from highly aggressive monetary policy and massive budget deficits. The other major view sees a Japanese–style deflation unfolding in coming years, tied to weak residential and commercial real estate values, strong productivity gains, major slack in labor markets, and anxious consumers.

The Federal Reserve
…on hold for now

Since mid–2007, the Fed has implemented a series of programs to help address the paralysis that has, too often, hampered global financial flows. The Fed’s and other major central banks’ success in “exiting” these steps during the next 18 months will be critical to keeping inflation under control.

The federal funds rate, the most important of all short-term interest rates, has been at an all-time low of 0.00%-0.25% since December 2008. European financial stress suggests the Fed will delay the time when it begins to push this rate higher, probably until 2011’s first half.

Long-Term Interest Rates
…don’t wait too long

Global anxiety about massive government debt levels in southern Europe has pushed scared investors into U.S. government securities. The surge in demand has pushed bond prices higher and investment returns (yields) lower. Correspondingly, rates of 30-year fixed-rate conventional mortgages have moved slightly lower.

It remains a very attractive time to buy a new home or foreclosed property or to refinance, while recognizing that one in four U.S. homeowners is “underwater” on their mortgages…owing more than the home is worth. Mortgage rates could move higher later this year if global investor anxiety declines.

The Global Economy
…a focus on two

Overall global economic growth returned during 2009’s final few months, led by an Asian rebound. For now, two stories dominate the outlook for the global economy…Europe and China.

The ability of wealthier European nations (such as Germany and France) and the International Monetary Fund to alleviate investor anxiety about massive debt levels of Greece, Portugal, Spain, etc. will be critical to the future of the euro currency, as well as the European economy. Regaining investor confidence is mandatory.

At the same time, steps by China’s political leadership to slow this behemoth’s economy down are underway. Whether such steps can be successful, while avoiding a real estate bust, will go a long way to determining Asia’s near-term economic future.

The Bottom Line?
The Great Recession has given way to a reasonable U.S. economic growth pace, although serious challenges remain. We also expect…unprecedented budget deficits…election surprises…better employment news…modest inflation…extremely low short-term and attractive long-term interest rates…and an anxious global economy.


Wouldn't It Be Nice If...

…there was a stronger collective effort to improve opportunities in America’s inner cities

…our 401(k) balances would continue to rebound nicely in coming years

…some of the mind-boggling research advancements in energy production and alternative energy soon made their way into the economy

…Wall Street “high rollers” had greater legal and financial accountability for the financial market abuses of recent years

…our kids realized sooner that Mom & Dad might actually know what they are talking about

…more working people would save seriously for their Golden Years (an estimated one-third of the U.S. population saves zero for retirement)

…men and women were from the same planet

…“government” would recognize that it is there to serve the people, and not the other way around

…American corporate and consumer confidence would rise solidly in coming months

…America’s Vietnam War veterans would finally get respect for serving their country

…incompetent corporate CEOs who drive companies into the ground were not rewarded with multi-million dollar “golden parachutes” to simply go away

…Johnny Carson was still king of late-night TV

…there were less irritating ways to bring buyers and sellers together than junk mail, spam, pop-up ads, telemarketing, and endless TV commercials

…“old fashioned” common courtesy between people made a big comeback

…American military personnel could see their families more often

…we would all get more involved in enriching the lives of those less fortunate than ourselves

…the Congress would soon get serious about reining in the growth rate of entitlement programs in coming years. Note: In regard to Social Security, M edicare, and Medicaid…we do not have to cut spending…we have to slow down the growth rate of future spending…BIG difference!

…America’s silent majority (our parents and grandparents) received greater respect for the enormous wartime sacrifices they made to help protect the freedoms we all enjoy today

…“far left” liberals and “far right” conservatives would back off a bit

…U.S. firefighters, police officers, and military personnel received our respect ALL of the time

…our presidential campaigns were much shorter and less exhausting…for candidates AND voters

…we could benefit more from years of practical business experience of millions of retirees, rather than simply “putting them out to pasture”

…each long-term member of Congress was required to take a year off, start a new business with limited funding, meet a payroll, and then deal with the complexities and hassles THEY have created

…your garbage disposal didn’t eat better than two-thirds of the world’s population

…many spoiled and pampered athletes in MLB, the NFL, the NBA, and the NHL had to get regular jobs at regular wages (at least for awhile)

…solid Mexican economic growth would provide more good jobs at home

…we didn’t have a $13,000,000,000,000 gross national debt, and we weren’t spending over $1,000,000,000 DAILY just to pay the INTEREST on that debt

…teachers received more admiration and respect from students and their parents

…we would all keep in mind that despite the problems and challenges we face in the U.S., this is still one of the greatest countries in the world


Finance Expert Right Boarder