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UNC Charlotte economist predicts 'robust' recovery in 2010

UNC Charlotte Economics Professor John Connaughton says in the second half of the year, the recession will show signs of ending. He says in 2010, it will quote "really take off." 

"Because the stimulus package will, in fact, be in place. And you put that together with a better functioning economy, particularly a better functioning financial system. Okay, you put those two things together. I would not be surprised to see a four percent growth rate in 2010," he says.

That's a bold forecast considering both the U.S. and North Carolina had negative economic growth in the fourth quarter of 2008. But Connaughton says the recovery will be slow-going because job losses will continue. Plus, he says consumers- who are either jobless or afraid to lose their jobs- just aren't spending.

Connaughton says temporary jobs from stimulus-funded projects should help a lot. He says, "It will have created kind of a springboard, if you will, to put money in people's pockets, to get that consumer confidence number off that 25 and back up higher. And the economic then should be able to take care of itself."

And if that spending is on big ticket items, Connaughton says consumers would need credit. Ideally that would get banks to start lending rather than hanging on to hundreds of billions in reserves. Curt Fochtmann is a managing partner at the accounting firm Ernst and Young. He attended Connaugton's presentation and says he liked the data, but has questions. Fochtmann says, "If as he says jobs are going to continue to diminish, we're going to have more unemployment, where's consumer confidence going to come from? Can it come only from these quote- excess bank reserves- that all of a sudden money's lent out? And then there's the impact of lending money out."

In that case, Fochtmann worries consumers might spend and banks would lend without moderation, perpetuating the cycle of bad debt. Connaughton says closer federal oversight and conservative practices at banks would avert a repeat.