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Shoulton Urges Caution on U.S. Recovery at FCIB NY International Profit Summit

Although officials seem eager to trot out headline after headline of positive economic news, the U.S. economy isn't out of the woods yet. In fact, the U.S. recovery could be derailed by a number of factors, and one economist at Wednesday's FCIB International Profit Summit held in New York described caution about the American economy as "well-founded."

In his keynote address, Byron Shoulton, vice president and international economist with FCIA Management Co., Inc., noted that despite the nation's "gradual" recovery, a number of factors could erase many of the recent gains made in employment, manufacturing and consumer confidence.

"The U.S. economy has shown glimmers of improvement over the last few months," said Shoulton. "Job creation appears to be buoyant, with something like 200,000 jobs per month being produced here in the U.S., and growth in manufacturing and even existing home sales are starting to pick up. Car sales, for example, have been higher the last four months than they have been for three years, and even the banks, while they're concerned with Basel III and the Dodd-Frank requirements, are showing a bit more select willingness to lend."

But these improvements are threatened by numerous negative developments, the most pressing of which might be the country's budding energy problems. "We have a rising energy crisis, which is particularly threatening to the recovery. Oil prices are up a little more than 7% since the beginning of this year, and that could eventually dampen the improvements in consumer confidence we've seen the last few months," said Shoulton. "And while the U.S. housing sector is making baby steps toward revival, it remains in critical condition with lots of mortgages underwater."

Until these issues abate, Shoulton noted that the recovery for which the U.S. is so seemingly desperate will remain elusive. "Until housing and construction both recover, a broad U.S. recovery will remain weak and hesitant," he noted, adding that policymakers must leave all options on the table to mitigate these potential problems. "The Federal Reserve cannot rule out further quantitative easing," said Shoulton. "And the U.S. faces a budget deficit this year of $1.3 trillion."

"We are in gridlock, and we face an uphill climb," he added.

Overall, Shoulton noted that his firm is forecasting 1.8% GDP growth for the U.S. this year, up a mere tenth of a percent from the 1.7% growth in 2011.

Jacob Barron, CICP, NACM staff writer