James Smith, Ph.D., professor of finance at UNC-CH, says that the U.S. is already out of one of its mildest recessions on record and is poised for 10 years of strong growth.

“There are very good things ahead,” Smith says.

Smith says the U.S. entered recession – which is defined as two quarters of decline in the Gross Domestic Product (GDP) – March 16 and came out Nov. 16. Revised GDP figures from the U.S. Dept. of Commerce are due today. The GDP is currently pegged at .2 percent for the last quarter. Smith expects the revised GDP number to rise substantially to 1.5 percent. Fed Chairman Alan Greenspan also testified before Congress on Wednesday that the economic recovery has begun,

“Then I think almost everyone will start admitting the recession is actually over,” Smith says. “The last four recessions, by the time they told us we were in one, we were already out.”

Smith says he expects it will take technology companies a year to recover fully, but the rest of the economy, buoyed by record-setting home sales and consumer confidence, will come roaring back to life this year.

Tech headaches aren’t over

The bad news is that he thinks it will take a full year for technology companies to see boom times again. “The fact that Nortel and Cisco aren’t back to where they were will not hold back the whole economy,” he says.

Information technology took a particularly hard hit during the downturn with orders for tech equipment “falling off a cliff.” Smith says “We should have seen it coming, when expenditures on IT got up to almost 13 percent of the GDP.”

On the other hand, there is lots of good news, Smith says.

“Consumer confidence remains quite high,” Smith says. “Consumer spending is about 68 percent of the GDP. The survey of National Independent Businesses is extraordinarily bullish, and independent businesses account for about half the new job creation.

“Existing home sales rose in excess of six million in January, a number never before seen. So people are out there buying houses, and all the things that go into that, towels, sheets, furniture and drapes, all that stuff. They’ll eventually get to more high tech stuff.”

Housing is supported by “very reasonable” mortgage terms and price growth for existing homes that makes it profitable to become a first-time home buyer or to trade up, Smith says.

“Stimulus like you wouldn’t believe”

Energy costs are low, partly due to the two warmest winter months on record, and that “acts like a tax cut in the U.S.,” Smith says.

Factor in 11 straight rate cuts by the Federal Reserve Board, add in that citizens have only spent half the tax rebate package, and “We’ve got stimulus like you wouldn’t believe coming along,” Smith says.

Even IT should recover by year’s end, Smith says. “The good news about their excessive inventories is that IT equipment gets obsolete in a hurry.”

Rated the most accurate economic forecaster three of the last five years by the Wall Street Journal, the Kenan Flagler Business School professor tells Local Tech Wire the Sept. 11 terrorist attack deepened the economic downturn.

Smith himself narrowly escaped being a victim of the attacks. He and his wife were at the Marriott World Trade Center hotel getting ready to start their day when the planes stuck the towers.

Ten years of growth ahead

Prior to the attack, Smith says, “The economy was not in poor shape. It only grew by 1.2 percent in the 12 months that ended June 30, but that was at least a positive number.”

He predicts 4.2 percent growth this year, which is optimistic compared to many. “The consensus now is about 1.5 percent, but the average the last few years was 6.8 percent annual growth, so I thought I was being reasonably conservative.”

Smith, who predicted this recession was coming, although he missed it’s timing a bit, said all along he thought it would be brief and mild and followed by another decade of strong growth and prosperity.

He says he still sees exactly that, 10 years of strong growth, but with one caveat:

“There’s a weird historical fact to weigh. George W. Bush is our 16th elected Republican President. All 16 gave us a recession in the first two quarters of their administration. If he’s reelected or we elect another one, that has to be considered.”

Smith says we tend to elect Democratic Presidents to get the company moving economically, which often causes inflation. Then we elect Republicans to restore fiscal discipline. He points to the Carter/Reagan switch as an example.

“It goes back and forth,” Smith says.