Financial Update (First Quarter 2010)
Lockhart Describes a Forked Economic Road
The nation's economy is in the early stages of a fragile recovery that could go one of two ways: a traditional sharp rebound following a deep recession, or a more gradual comeback with slow progress on unemployment, Atlanta Fed President Dennis Lockhart said in a recent speech in Augusta, Ga.
Variables remain in play
The slower-recovery narrative, Lockhart continued, would entail fundamental shifts in business and consumer practices. Such a shift might mean that companies learned from the recession that they can operate permanently with less inventory and fewer workers. For their part, consumers have already reduced their spending and increased saving.
"And even if consumers wanted to resume prerecession spending habits, the consumer finance industry, in this narrative, will not accommodate previous levels of consumption," Lockhart said. "In this narrative, growth continues, but at a very modest pace, and unemployment is very slow to recede."
Key points to survey
February 26, 2010