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TRENDING & SPENDING What Can We Expect From the Economy? BY DARLENE GUDEA, president Oceanside, CA – Tis month, it is all about the upcoming national elections. "Regardless of who becomes the next President and which party will control each house of Congress, we can predict with some confidence what will transpire from the economy aſter the election based on current trends," said Frank Chow, chief economist for Trade Show Executive Media Group. "Unfortunately, the trends indicate the next four years will continue to be challenging," he said. "However, there is a ray of hope in one important sector of the economy — housing." Chow outlined the major U.S. economic trends for 2012: y Jobs growth has sputtered since the First Quarter. Te unemployment rate dropped from 8.3% in January to 8.1% in August. "However, matters are really much worse when you consider that beyond the 12.5 million unemployed, at least 5 million people have given up looking for a job and 8 million are underemployed," Chow pointed out. In August alone, he said that over 368,000 leſt the labor force. Te decline in the labor force participa- tion rate has been accelerating and is at the lowest level since the early 1980s. y Manufacturing has contracted for past three months, according to the August ISM Index. Te recent resurgence in manufacturing may be a temporary blip in a long-term downward trend, said Chow. "Manufacturing has been in decline since 1977, and went into a tailspin aſter the 21st century began, losing over 5.1 million jobs until 2010. Tat's when the auto industry rebounded." However, in 2012, the pace of growth slowed again, he noted. In August, 15,000 manufacturing jobs were lost and industrial production slumped. y Retail Sales are flattening. Consumers became frugal this Spring, and that carried over into the Summer. In Au- gust, there was some improvement in spending, but 80% of the gain came from car and gasoline purchases, Chow noted. Retail sales, excluding automobiles and gasoline, rose a meager 0.1%. y Wage growth has been sluggish and household income has been falling. "Many of the jobs created since the recession ended have been in lower wage industries such as retail or food service," Chow said. "As a result, real median annual household income fell from $54,916 in December 2007 to $50,964 in June 2012." Trends point to a weakening U.S. economy, which has been slowing since the end of the Fourth Quarter of 2011 when real GDP growth was 3%. Growth dropped to 2% in the First Quarter and 1.7% in the Second Quarter. The lethargy has persisted into the Third Quarter, as evidenced by the disappointing jobs report for August. Frank Chow, TSE CHIEF ECONOMIST y Corporate profits and revenues have been strong, but are moderating. "Profits at Standard & Poor's 500 companies have increased for at least ten consecutive quarters, but for the past four months, the earnings rate has slackened as growth slowed in China, Europe, and in the U.S.," Chow said. In the 2nd Quarter, earnings rose 8.4% from the prior year and revenue grew a mere 1.1%. "Some economists are forecasting a 2% decline in corporate profits for the Tird Quarter. Tis trend, if it persists, may impact trade show investment next year," Chow warned. y On the home front, the news is good. Housing markets are bottoming and starting to perk up. Housing starts, building permits, new and existing home sales are all rising. Home prices are stabilizing. Te number of improving housing markets across the country rose to 99 in September, according to the National Association of Home Builders/ First American Improving Markets Index. Tis is up from 80 metro areas in August. Most Signs Point to a Weakening Economy Collectively, however, the trends point to a weakening U.S. economy, which has been slowing since the end of the Fourth Quarter of 2011 when real GDP growth was 3%. Growth dropped to 2% in the First Quarter and 1.7% in the Second Quarter. Te lethargy has persisted into the Tird Quarter, as evidenced by the disappointing jobs report for August. Federal Reserve (Fed) Chairman Ben Bernanke reiterated that unemployment remains a "grave" concern. In response, the Fed in September announced its third Quantitative Easing (QE3) program whereby the Fed will purchase $40 billion in mortgage bonds a month in an effort to create more jobs and spur the economy. "Even if one political party wins control of the government, major reforms to ad- dress these issues will remain difficult and take time," said Chow. "Neither party will control 60 seats in the Senate in order to pass legislation without a filibuster." Chow pointed out that even with Obamacare, budget experts say not every part of the health care law can be repealed using the simple majority rules of reconciliation. For this reason, Chow believes these economic trends will continue aſter the election has been decided and into 2013. Several prominent economists are predicting the economy will not fully recover until 2017, he noted. Chow outlined five structural challenges that must be addressed www.TradeShowExecutive.com | October 2012 15 SPONSORED BY