There has been much written about the economy recently. The markets have reflected very high volatility and are reacting to revised GDP for the first quarter to a meager 1.3% annualized rate, the obscene posturing of our leaders on the debt debate and most recently the concern over the European Debt.
As a CPA, we generally have a pretty good read on the economy, mostly because we are constantly speaking with clients and get real time feedback on how business activity is proceeding. In the first quarter of this year, it was apparent things were slowing; we had most clients telling us that first quarter of 2011 was less robust then the first quarter of 2010. Since 2010 wasn’t anything to get excited about, we were a little concerned. The press at the time, however, was that the economy was moving along and recovering from the recession and the markets were reacting appropriately with the Dow up 10.65% for the year, at its peak on May 2nd.
Conversely, we are generally hearing that business has rebounded and that revenues are back up in the second and third quarters of this year. So we are expecting that when the current economic activity is reported, that GDP will be up greater than the 1.3% extrapolated from the first quarter. This is contrary to what we are all hearing in the financial press these days, as the markets are jittery over the European debt and the lack of jobs.
I do think 2011 will reflect growth and small business will continue to sustain growing profitability. However, growth will continue to be slow and we will not be able to add the jobs we need to overcome the job reduction in the government sector and pull ourselves fully out of the recession. Many of our fellow citizens will continue to suffer from the effects of high unemployment.
The problem for our clients and business colleagues, however, is a lack of certainty and confidence. We all hear the abundance of negative rhetoric that goes on in the various news outlets and it is difficult to get a real grasp on where the economy is going over the next 24 months. Clearly, Mr. Bernanke was trying to help with this when he committed to not raise interest rates for two years. We can only hope that our political leaders will follow suit and abandon similar rhetoric and instead come to reasonable compromises on spending and taxes to give us something to be optimistic about.