Economists Predict Economic Growth in 2010

As economists put forth their forecasts for the coming year, the good news is many expect to see the economy grow by as much as 5 percent in 2010, according to a recent story on CNBC.com, but most are not as optimistic in their outlooks for the critical employment and housing sectors. 

“You have to remember that you’re starting from a low base,” Chris Varvares, president of the economic consulting firm Macroeconomic Advisers, told CNBC.com. Varvares’ firm is forecasting a four percent growth in the GDP next year. “We’re getting a snapback that, when judged with those from other deep recessions, is pitiful.”

The National Association of Business Economists (NABE) and the White House both predict economic growth in the mid-3 percent range.

Economists at Global Insight expect economic growth of 2-2.5 percent but, like many experts, don’t see unemployment following suit. Most forecasters put the unemployment rate at 9 percent or higher for the entire year – but Global Insight is less optimistic, predicting unemployment to edge higher to 10.5 percent.
Michael Mussa, a former International Monetary Fund economist now with the Peterson Institute for International Economics, predicts a 5 percent GDP growth rate for next year and sees job creation up monthly as well.

“The biggest drawback, the big unknown, is the massive amount of debt households have,” Christian Weller of the University of Massachusetts and the Center for American Progress told the news organization. “A combination of employment and wage growth should help, but it’s an unknown. We've never had this much debt before.”

Modest growth is expected in the housing sector, where most experts agree that home prices have hit bottom. While the numbers are below 2008 levels, most forecasters (including NABE and Varvares) expect housing starts at 700,000-900,000 for the year, with much of that recovery evident in single family homes.

Ram Bhagavatula, managing director at the hedge fund Combinatorics Capital, is more bullish on housing, forecasting starts of one million. “There’s been a lot of postponed housing consumption,” he told CNBC.com. Bhagavatula is currently estimating a 3.5 GDP growth, but said he’ll probably revise it to 4.0-4.5 percent next month.

Read the full story at CNBC.com

It Really Is As Small As A Postage Stamp

Ever look around your home and think, “this place is just not big enough”? Chances are, Zaarath and Christopher Prokop’s home may make yours look like a mansion in comparison.

The Prokops, who live in what The New York Post’s December 6th story dubbed “the smallest apartment in New York City,” have just 175 square feet to call home. To give you an idea of just how small that is – the couple’s queen size bed takes up 1/3 of the main living space in their “microstudio.”

The unit’s main living area, which triples as a bedroom, kitchen and living room, is just 10 feet wide and not quite 15 feet long. A tiny bathroom that houses a small sink, shower and toilet, is just three feet wide and nine feet long. The couple bought the condominium a few months ago for $150,000.

The Prokops utilize creative space-management and have few appliances -- just a mini refrigerator, a hotplate and a cappuccino maker. "We don't cook," Zaarath Prokop told The Post. "So when you don't cook, you don't need plates or pots or pans. So we use that space for our clothes."

A small television, a wine rack that doubles as a shelving unit and a storage trunk that serves as seating fill out the unit. They don’t have a trashcan, they use the trash chute in the hallway.

"Every bit of space is utilized," Christopher Prokop told the newspaper. "We really have everything we need."

The unit is part of a prewar building that originally consisted of nine maids’ quarters. Eight of the units were reconfigured into four larger condos – each of which sold for about half a million dollars – but the Prokops’ unit just didn’t fit in the plans.

The couple is planning to do some renovations on the unit, such as adding a Murphy bed, and they expect to have their mortgage paid off in just two years.  

"We're going to own something in Manhattan in two years,” Zaarath said. “How many people can say that? And we're very happy doing more with less."

Click here to read the complete story.

One-Quarter of U.S. Households Lack Sufficient Access to Banks

A study released Wednesday by the Federal Deposit Insurance Corp. (FDIC) reported that approximately 30 million U.S. households – representing one in every four – have limited or no access to banks for their financial transactions.

Lower-income Americans, minorities and families headed by single adults were more likely to be “unbanked” or “underbanked” according to the FDIC. Unbanked households do not have access to banking services, while underbanked consumers may have checking or savings accounts, but also utilize costlier alternative financial services such as non-bank money orders, check-cashing services, payday loans and pawn shops.

The report said that unbanked families often rely heavily on cash transactions, leaving them vulnerable to theft, and making it difficult for many to establish credit histories and financial security.

According to the report, more than half of unbanked consumers said their reason for not opening an account because they felt they did not have enough money or didn’t write enough checks to need such an account. Another 12 percent said the minimum balance requirement at a bank was too high.

The highest percentages of unbanked households were in the Riverside-San Bernardino, Calif. Area (11.5 percent), Dallas-Ft. Worth (10.9 percent), and Houston (10.6 percent).

On Wednesday, Sen. Herb Kohl (D-Wis.) proposed legislation that would establish a federal fund to guarantee small, short-term bank loans for unbanked and underbanked Americans.

To access the report, visit FDIC’s Web site at: http://www.fdic.gov/householdsurvey/full_report.pdf