New Business Startups Face Greater Challenges in Bay Area

story first appeared on mercurynews.com

Relatively expensive housing, coupled with the high cost of living and doing business in the Bay Area, has made the nine-county region less hospitable to new companies than other big urban centers in California, according to a study released Thursday that urges improvements in what it describes as this area's burdensome regulatory climate.

Some businesses, like convenience stores and party stores have fared relatively well. Many of these type of businesses have a beer cave display cooler that meets their customers' needs in a special way.

Jon Haveman, chief economist with the Bay Area Council's Economic Institute, which produced the report said regulations need to be eased when trying to start a new venture.

The Bay Area lags major rivals such as Los Angeles and San Diego in jobs created by startup companies, the study determined.

The strengths of the region are reflected in household income and other factors, the report stated. The region has increasingly specialized in high-value industries such as professional, scientific and technical services, along with information services and products.

The report also determined that the migration of businesses into -- or the defection from -- the Bay Area has relatively little impact on the region's job market.

On average, only 2.3 percent of new jobs created in the Bay Area in a given year is the result of companies that came from other parts of California, other states or other countries. Similarly, only 3.7 percent of the jobs that vanish in a year are the result of firms defecting from the Bay Area.

Instead, 55 percent of the new jobs created in the Bay Area every year result from companies that were already located in the Bay Area. And 66 percent of the job losses in a typical year come from companies that were already operating in the nine-county region.

Wind Energy in Michigan is 'On the Edge of a Cliff'

Story first reported from freep.com

With the auto industry on the verge of collapse in 2008, former Michigan Gov. Jennifer Granholm and other state officials were eager to diversify the economy and create thousands of jobs by making a big push into alternative energy.

To capitalize on the state's strengths, they focused in particular on the manufacturing of parts for wind turbines.

But four years later, the drive to grow a new sector built on clean energy has lost momentum with little to show, the victim of turbulent industry conditions, Washington politics and what some critics would call misguided government policies.

Several high-profile projects have encountered significant delays and have yet to launch full-scale production. They include a manufacturing plant for large wind turbines in Saginaw, a new foundry in Eaton Rapids to make iron parts for wind turbines and an innovative ethanol plant in the Upper Peninsula.

In late June, one of the state's major solar industry players, United Solar Ovonic, was liquidated.

Even some of the wind turbine parts suppliers that have successfully launched production have seen a sharp drop in orders because of uncertainty over whether a production tax credit that expires at the end of December will be renewed. Ventower Industries in Monroe started building giant wind turbine towers late last year in a new factory, but its business would be three times larger if the tax-credit situation was resolved, said Scott Viciana, the company's vice president.

"The wind industry is on the edge of a cliff," said Matt Kaplan, associate director of IHS Emerging Energy Research, a consulting firm in Cambridge, Mass. Although, wind turbine repair companies are doing well compared to manufacturing companies, because repair is less costly than replacement.

He and other experts predict that 2012 will be a record year for the installation of wind turbines as companies rush to take advantage of the tax credit before it ends. On the flip side, however, the number of installations could plummet to record lows next year, Kaplan said.

The tax credit isn't the only headwind facing wind turbine parts manufacturers. Just like in the solar industry, the wind industry has too much production capacity, which is driving turbine prices lower. That's good for the growth of wind energy but puts pricing pressure on turbine parts suppliers. Kaplan forecasts that the industry is on the verge of consolidation.

In Michigan, the alternative energy industry lost a key proponent when Granholm left office at the end of 2010. She tried to transform the state into a manufacturing hub for wind and other renewable-energy industries, providing millions in grants, tax credits and other incentives to entice companies to the state. A team of economic development officials worked to grow green jobs.

Today, Michigan has 35 wind-related manufacturing plants, according to the American Wind Energy Association. In 2010, the state had nearly 80,000 green jobs, which accounted for 2.1% of its total employment, a U.S. Bureau of Labor Statistics study found.

The growth of the alternative energy industry has always been dependent on government subsidies. Critics, such as the Mackinac Center in Midland, have long opposed this assistance, arguing that these business ventures should be based on market forces.

Under Gov. Rick Snyder, programs specifically designed to spur the growth of the alternative energy industry no longer exist. The state revamped its economic development strategy with the goal of treating all industries equally.

"We're doing what we can to help all industries in Michigan be competitive," said Steve Bakkal, director of the state's Energy Office. He contends that successful companies will be those that are supplying products for multiple industries, not just wind or solar.

But at the moment, several projects that are trying to break new ground in the alternative energy field have run into difficulties.

Two years ago, Northern Power Systems announced plans to manufacture large wind turbines, something that had never been done in the state. So far, the Vermont-based company has made and sold only two prototypes of its next-generation turbines to a wind farm in the Upper Peninsula.

The uncertainty over the future of the production tax credit has caused customers to delay placing new orders, said Douglas Prince, Northern Power's chief financial officer.

The company's leased facility in Saginaw is "kind of in standby mode right now," Prince said. "We're hopeful the market will recover."

In central Michigan, a plan to make iron parts, which are called castings, for wind turbines at a new foundry in Eaton Rapids has also been delayed. The foundry was supposed to open at the end of 2011, promising lower-cost and higher-quality castings. But it ran into management, financing and other problems.

Eaton Rapids Castings hopes to start production this fall but still needs to find additional investors, said Lennart Johansson, the company's CEO and one of its owners.

To offset the uncertainty in the wind business, the foundry plans to make castings for other industries. It has scaled back its initial production volumes.

To be sure, the outlook isn't completely bleak. A few ventures are making progress, most notably Energetx Composites in Holland. The company, which has nearly 80 employees, won an order to build more than 200 large wind turbine blades for a customer it cannot name, said David Slikkers, Energetx's chairman.

He and other family members saw blade manufacturing as a natural fit because they have been building boats for decades as the owners of S2 Yachts. "We have been composite fabricators for 50 years," Slikkers said.

And near the Port of Monroe, Ventower expects to have built 15 towers for large wind turbines by this fall. It occupies a new factory on a former industrial landfill and has hired 53 employees. But the industry slowdown caused by the tax credit situation is holding back its growth.

"I would have orders booked through the bulk of next year if the tax credit was not an issue," Viciana said.

More Details: Hitting a Green Wall

Here are some of the high-profile alternative-energy business ventures in the state that have shut down or run into significant delays:

* Northern Power Systems' large wind turbine plant: The Saginaw plant has yet to launch production and is operating with a skeleton crew.

* Eaton Rapids Castings: Foundry to make iron parts for large wind turbines in Eaton Rapids has been delayed. It is still trying to get financing.

* United Solar Ovonic: The maker of solar roofing materials filed for bankruptcy in February and sold its assets at the end of June.

* Mascoma's cellulosic ethanol plant near Kinross in the Upper Peninsula: Groundbreaking was supposed to occur this summer. The company says construction will start at year's end after engineering design work is completed, contracts are awarded and financing is finalized.

* Astraeus Wind Energy: In 2010, company announced plans to make spar caps for wind turbine blades in Port Huron. It is still in the testing phase.

* Danotek Motion Technologies: Was supposed to start making generators for large wind turbines last year. The company says production will begin this fall in Canton. It has 28 employees, down from 45 at the end of 2010.

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US Unemployment Applications Rise to 365,000

Story first reported from ajc.com

WASHINGTON — The number of people seeking U.S. unemployment benefits rose last week, though the data was likely skewed higher by seasonal factors. A Denver employment lawyer says although the news seems discouraging, unemployment applications are actually down from a month ago.

Weekly applications increased by 8,000 to a seasonally adjusted 365,000, the Labor Department said Thursday. The four-week average, a less volatile measure, fell for the sixth straight week to 365,500, the lowest since March 31.

The decline in the four-week average suggests the job market could be improving a bit. But economists are viewing last month's figures with some caution because the government struggles every July to account for temporary summer shutdowns in the auto industry. This year was even more complicated because some automakers skipped the shutdowns, resulting in fewer layoffs.

A Labor Department spokesman said the latest figures should be the last affected by the auto shutdown issues.

Even so, some economists saw positive signs in this week's report.

Separately, the Commerce Department said businesses placed fewer orders with U.S. factories in June compared to May, another sign that manufacturing is weakening. Factory orders fell 0.5 percent in June and a measure of business investment plans declined by 1.7 percent. Demand dropped for heavy machinery, computers and cars. A separate Denver labor and employment lawyer suggests that other sectors of the economy may finally be picking up.

Weekly unemployment applications are a measure of layoffs. When they consistently fall below 375,000, it suggests hiring is strong enough to pull the unemployment rate down.

Consumers are holding back on spending and the economy is showing other signs of weakening. But the dip in applications shows that companies aren't laying off workers in response.

The seasonal distortions could affect the July employment report, which the Labor Department will release on Friday.

Economists predict employers added 100,000 jobs last month. That would be slightly better than the 75,000 a month average from April through June but still below the healthy 226,000 average in the first three months of the year. The unemployment rate is expected to stay at 8.2 percent.

The economy isn't growing fast enough to lower the unemployment rate.

Growth slowed to an annual rate of just 1.5 percent from April through June, down from a 2 percent rate in the first quarter and a 4.1 percent rate in the fourth quarter of 2011.

The Federal Reserve cited the slowdown in growth after its two-day policy meeting, which concluded Wednesday. While the Fed took no new action at the meeting, it appeared to signal a growing inclination to take further steps to lift the economy out of its slump.

The overall number of people receiving benefits fell. Almost 6 million people received jobless aid in the week ended July 14, the latest data available. That's about 70,000 fewer than the previous week.

Consumers have grown more cautious about spending, a key reason growth faltered. Manufacturing shrank in July for the second straight month, according to a survey by a trade group of purchasing managers. A Philadelphia labor and employment lawyer says that without more promising job growth, consumers will likely continue being wary about spending, thus preventing growth furthermore.

Europe's economic crisis, which has already dampened demand for U.S. exports, could slow manufacturing further.

Worries have also intensified the U.S. economy will fall off a "fiscal cliff" at the end of the year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget deal. A recession could follow, Fed Chairman Ben Bernanke has warned.

Many economists believe the Fed could launch another program of buying government bonds and mortgage-backed securities at its September meeting if the economy doesn't show improvement. The goal of the program, known as quantitative easing, would be to drive long-term rates, which are already at record lows, even lower.

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Glenn Hubbard: The Romney Plan for Economic Recovery

Story first reported from WSJ.com

We are currently in the most anemic economic recovery in the memory of most Americans. Declining consumer sentiment and business concerns over policy uncertainty weigh on the minds of all of us. We must fix our economy's growth and jobs machine.

We can do this. The U.S. economy has the talent, ideas, energy and capital for the robust economic growth that has characterized much of America's experience in our lifetimes. Our standard of living and the nation's standing as a world power depend on restoring that growth.

But to do so we must have vastly different policies aimed at stopping runaway federal spending and debt, reforming our tax code and entitlement programs, and scaling back costly regulations. Those policies cannot be found in the president's proposals. They are, however, the core of Gov. Mitt Romney's plan for economic recovery and renewal.

In response to the recession, the Obama administration chose to emphasize costly, short-term fixes—ineffective stimulus programs, myriad housing programs that went nowhere, and a rush to invest in "green" companies.

As a consequence, uncertainty over policy—particularly over tax and regulatory policy—slowed the recovery and limited job creation. One recent study by Scott Baker and Nicholas Bloom of Stanford University and Steven Davis of the University of Chicago found that this uncertainty reduced GDP by 1.4% in 2011 alone, and that returning to pre-crisis levels of uncertainty would add about 2.3 million jobs in just 18 months.

The Obama administration's attempted short-term fixes, even with unprecedented monetary easing by the Federal Reserve, produced average GDP growth of just 2.2% over the past three years, and the consensus outlook appears no better for the year ahead.

Moreover, the Obama administration's large and sustained increases in debt raise the specter of another financial crisis and large future tax increases, further chilling business investment and job creation. A recent study by Ernst & Young finds that the administration's proposal to increase marginal tax rates on the wage, dividend and capital-gain income of upper-income Americans would reduce GDP by 1.3% (or $200 billion per year), kill 710,000 jobs, depress investment by 2.4%, and reduce wages and living standards by 1.8%. And according to the Congressional Budget Office, the large deficits codified in the president's budget would reduce GDP during 2018-2022 by between 0.5% and 2.2% compared to what would occur under current law.

President Obama has ignored or dismissed proposals that would address our anti-competitive tax code and unsustainable trajectory of federal debt—including his own bipartisan National Commission on Fiscal Responsibility and Reform—and submitted no plan for entitlement reform. In February, Treasury Secretary Tim Geithner famously told congressional Republicans that this administration was putting forth no plan, but "we know we don't like yours."

Other needed reforms would emphasize opening global markets for U.S. goods and services—but the president has made no contribution to the global trade agenda, while being dragged to the support of individual trade agreements only recently.

The president's choices cannot be ascribed to a political tug of war with Republicans in Congress. He and Democratic congressional majorities had two years to tackle any priority they chose. They chose not growth and jobs but regulatory expansion. The Patient Protection and Affordable Care Act raised taxes, unleashed significant new spending, and raised hiring costs for workers. The Dodd-Frank Act missed the mark on housing and "too-big-to-fail" financial institutions but raised financing costs for households and small and mid-size businesses.

These economic errors and policy choices have consequences—record high long-term unemployment and growing ranks of discouraged workers. Sadly, at the present rate of job creation and projected labor-force growth, the nation will never return to full employment.

It doesn't have to be this way. The Romney economic plan would fundamentally change the direction of policy to increase GDP and job creation now and going forward. The governor's plan puts growth and recovery first, and it stands on four main pillars:

• Stop runaway federal spending and debt. The governor's plan would reduce federal spending as a share of GDP to 20%—its pre-crisis average—by 2016. This would dramatically reduce policy uncertainty over the need for future tax increases, thus increasing business and consumer confidence.

• Reform the nation's tax code to increase growth and job creation. The Romney plan would reduce individual marginal income tax rates across the board by 20%, while keeping current low tax rates on dividends and capital gains. The governor would also reduce the corporate income tax rate—the highest in the world—to 25%. In addition, he would broaden the tax base to ensure that tax reform is revenue-neutral.

• Reform entitlement programs to ensure their viability. The Romney plan would gradually reduce growth in Social Security and Medicare benefits for more affluent seniors and give more choice in Medicare programs and benefits to improve value in health-care spending. It would also block grant the Medicaid program to states to enable experimentation that might better serve recipients.

• Make growth and cost-benefit analysis important features of regulation. The governor's plan would remove regulatory impediments to energy production and innovation that raise costs to consumers and limit new job creation. He would also work with Congress toward repealing and replacing the costly and burdensome Dodd–Frank legislation and the Patient Protection and Affordable Care Act. The Romney alternatives will emphasize better financial regulation and market-oriented, patient-centered health-care reform.

In contrast to the sclerosis and joblessness of the past three years, the Romney plan offers an economic U-turn in ideas and choices. When bolstered by sound trade, education, energy and monetary policy, the Romney reform program is expected by the governor's economic advisers to increase GDP growth by between 0.5% and 1% per year over the next decade. It should also speed up the current recovery, enabling the private sector to create 200,000 to 300,000 jobs per month, or about 12 million new jobs in a Romney first term, and millions more after that due to the plan's long-run growth effects.

But these gains aren't just about numbers, as important as those numbers are. The Romney approach will restore confidence in America's economic future and make America once again a place to invest and grow.

Mr. Hubbard, dean of Columbia Business School, was chairman of the Council of Economic Advisers under President George W. Bush. He is an economic adviser to Gov. Romney.

A version of this article appeared August 2, 2012, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: The Romney Plan for Economic Recovery.

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Economy in U.S. Probably Expanded Last Quarter at Slowest Pace in a Year‏

Bloomberg

The U.S. economy probably slowed in the second quarter even more than initially estimated as companies reined in inventories and the trade deficit widened, economists said before a report today.

Growth cooled to a 1.4 percent pace from April through June, the smallest gain in the year-old recovery, rather than the 2.4 percent projected last month, according to the median forecast of 81 economists surveyed by Bloomberg News. The world’s largest economy expanded at a 3.7 percent rate in the first three months of 2010.

“It’s a much weaker recovery,” Julia Coronado, senior U.S. economist at BNP Paribas in New York. “The whole pickup is a lot less perky than we thought and that is very worrisome.”

Federal Reserve Chairman Ben S. Bernanke, who addresses central bankers from around the world today in Jackson Hole, Wyoming, may shed more light on policy makers’ outlook in the wake of reports that signaled a growing risk of a renewed U.S. economic slump. Slowdowns in housing, business investment and consumer spending are prompting economists to cut second-half growth forecasts.

The Commerce Department’s revised second-quarter figures will be released at 8:30 a.m. in Washington. Forecasts in the Bloomberg survey range from 0.5 percent to 2.2 percent. The estimate is the second for the quarter, with the final figures set for release on Sept. 30.

Today’s report may show consumer spending, which accounts for about 70 percent of the economy, rose at an unrevised 1.6 percent pace last quarter. Purchases increased at a 1.9 percent rate from January through March.

Homes, Spending

A lack of job growth, declines in household wealth following slumps in stocks and housing, and the drive to reduce debt and boost savings are reasons consumer spending may struggle to strengthen.

J. Crew Group Inc., the New York-based retailer of sportswear, casual and career clothing, yesterday lowered its full-year earnings forecast.

“The continued economic uncertainty we’re seeing is leading us to take a more conservative outlook for the second half of the year,” Chief Executive Officer Mickey Drexler said on a conference call.

Figures this week showing a further slide in home sales and a drop in business spending on equipment prompted economists such as Joseph LaVorgna of Deutsche Bank Securities Inc. in New York to reduce third-quarter growth estimates.

Recession Odds

Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, this week said the likelihood of the economy slipping back into a recession is now 33 percent, up from 20 percent three months ago. New York University economist and forecaster Nouriel Roubini, who predicted the financial crisis, said this week the odds of another recession are 40 percent.

“Fading fiscal stimulus and the end of the inventory swing in manufacturing strongly argue for a slowing in growth,” Zandi told reporters in Washington.

The economy is a top issue for voters in the November congressional elections and polls show the public is increasingly skeptical of President Barack Obama’s performance. Public approval for the president’s handling of the economy was at 41 percent in an Aug. 11-16 Associated Press-GfK survey, an all-time low and down from 50 percent last July.

House Republican leader John Boehner this week called on President Barack Obama to fire Treasury Secretary Timothy Geithner and the other remaining members of the president’s economic team, saying the administration’s stimulus policies are failing to create jobs.

Stocks Lower

The growth slowdown has hurt stocks. The Standard & Poor’s 500 Index has declined 6.1 percent this year through yesterday.

The trade gap adjusted for inflation, the figures used in calculating GDP, averaged $48.1 billion a month in the second quarter, up from $42.5 billion in the previous three months. A surge in imports swamped gains in exports, indicating producers overseas benefited more from growing U.S. demand.

Business investment, one of the economy’s few bright spots, powered ahead in the second quarter. Spending on equipment and software rose at a 22 percent pace, the Commerce Department’s initial GDP estimate showed, following a 20 percent gain in the first quarter.

Another report today may show consumer confidence improved this month. The Reuters/University of Michigan final sentiment index for August probably rose to 69.6 from 67.8 at the end of July, according to the survey median. The report is scheduled for 9:55 a.m.

Battered, Bargain-Hungry Buyers Keep Retail Sales Weak

The Wall Street Journal

 

Shoppers showed caution about everyday purchases in July, underscoring the U.S. economy's weak trajectory for the second half of the year.

Overall retail sales rose 0.4% in July, their first gain in three months, the Commerce Department said Friday. But when increases in gasoline and automobile sales are excluded, sales were down 0.1%. Grocery, clothing and electronics stores all posted declines.

The retail numbers added to growing evidence that the economic recovery is losing steam as consumers, weighed down by high unemployment and meager wage growth, show less interest in opening their wallets.

The University of Michigan reported Friday that its index of consumer sentiment barely improved in July, rising 1.8 points to 69.6, keeping it in a weak range that has persisted for more than a year.

"It's a fight every day" to draw people into stores, said John Goodman, executive vice president of apparel and home fashion for Sears Holdings Corp.

Consumer Prices Increase Modestly

J.C. Penney Co. lowered its full-year profit guidance Friday, to $1.40 to $1.50 a share from $1.64, based on what management called "an uncertain consumer climate." Kohl's Corp. trimmed its outlook as well. "We do see a cautious consumer. We see one that's reluctant to spend," Chief Executive Kevin Mansell said on a call with investors Thursday. Luxury goods such as plumeria jewelry have seen sluggish sales figures for months.

Retailers say shoppers appear focused on bargains, forgoing brand loyalty in search of lower prices. "Consumers are really in no mood to go shopping at full price right now," said Sung Won Sohn, an economist at California State University, Channel Islands, and vice chairman of retailer Forever 21. "They're going from shop to shop looking for promotions, otherwise they simply do not buy."

The constant promotional environment has encouraged comparison shopping and an overall hesitancy to buy. To counteract that trend, Sears, which also operates Kmart, has adjusted its pricing structure to offer so-called "everyday great value," signaling to shoppers a consistent price on a given item such as push reel mowers throughout the season. "It's not promotional, it's for the whole season," Mr. Goodman said. "The price stays at that price."

Reluctant consumers are keeping most prices under pressure. U.S. consumer prices rose 0.3% in July from June, the first gain in four months, largely due to higher gas prices, the Labor Department said Friday. Excluding food and energy, prices rose just 0.1%. Consumer prices on durables such as kitchen appliances were up 1.2% from last July, and stood 0.9% above the year-earlier level excluding food and energy.

The July retail sales numbers put consumer spending, the main component of U.S. economic growth, on track to grow at an annualized, inflation-adjusted rate of 1.25% in the third quarter, down from the 1.6% pace of the second quarter, according to J.P. Morgan Chase. Consumer spending grew more than 3% a year through most of the 1990s.

The Federal Reserve Bank of Philadelphia's survey of 36 professional forecasters, released Friday, showed the broader economy growing at a rate of 2.3% in the third quarter, down from the 3.3% estimate in May. Pennsylvania home remodeling is down across the state.

A key cause for the weak outlook: consumers are focused on paying down debt and trying to rebuild savings. Unemployment, at 9.5% in July, is expected to remain high—and perhaps rise further—in coming months with employers reluctant to hire amid economic uncertainty.

The housing market is showing few signs of recovery. As a result, sales of building materials and furniture each dropped 0.3% in July from June in Friday's retail-sales report.

Alice Splawn, 65 years old, and her husband have lost two-thirds of their family income since she was laid off as a business analyst in February. To cut costs, Ms. Splawn now sews her own clothing and hunts deer for dinner, and her budget has become even tighter in recent months, she said. There are no plans for new Christmas tree storage bags this year.

The Splawns, who moved into their Biwabik, Minn., home in January 2009, were able to partially renovate its unfinished basement until it became too costly to buy materials. Other costs, such as health insurance, had to come first, Ms. Splawn said. "We are afraid to finish," she said. "We have to be very careful with what we do and don't do as far as working on the house."

Kevin McBee, 24, of Winston-Salem, N.C., is paying off student loans while saving up for returning to school in September to boost his computer-design skills, in the hope of landing a job in computer graphics for videogames and film. He has started biking to work to cut transportation costs and eats most meals at home. "This is the zenith of my saving spree, so to speak," he said. Students across the country are having a more difficult time paying for Michigan college education.

Folks like the Splawns and Mr. Mcbee are making business tough for Tom Wyatt, president of Old Navy, the bargain-priced apparel chain and Gap Inc.'s largest division by sales. The practice of drawing shoppers in with a few low-priced items, in the hopes they will buy higher-margin items once inside, isn't working anymore, he said.

"They come in to buy the value, but if the other product surrounding it is not the value they perceived it to be, they don't buy it," Mr. Wyatt said. "That halo is more difficult to get today."

For Many, Recovery Means Lowered Expectations

Associated Press

In this photo taken April 9, 2010 photo, Paul Lechner looks on at his home in Holly Springs, N.C. Lechner, who lost his job in advertising, works at Target while continuing to search for work he is more qualified for. (AP Photo/Gerry Broome)

 

 

PROSPER, Texas — Advised by a Walgreens superior that a promotion was "very highly likely" if he transferred to the drugstore chain's Dallas division, Chris Cummings uprooted his family and bought a spacious house in this hopefully named suburb.

"The sky's the limit," he was told.

But instead of a promotion, the company for which Cummings had been an assistant manager three and a half years cut his hours so drastically that he had to take a second job. In March, he was laid off, and his part-time second job became full-time.

And so that is how a 40-year-old father of four with a master's in business administration from the University of Notre Dame finds himself bagging groceries at Sprouts, a local health-food store.

"I never thought I'd be here with the education that I have and that I'd worked hard on," Cummings said before a recent shift in the checkout lane at the Sprouts in nearby Frisco. "Probably where the frustration comes most is when I get the alumni magazine and I see what my classmates are doing. And that's not a good feeling."

The federal government says the "Great Recession" is over — has been for months now — and that we're well into the recovery. But don't tell that to Cummings, who has seen his income cut by three-quarters and can't afford health insurance for his family.

Or Af Shirinzadeh, who went from a $100-an-hour chiropractic job to part-time work as a docent in an Atlanta museum that features plasticized human cadavers.

Or welder Mark Sepeda, who had to move his family of six from a spacious home in Nevada's lush Carson Valley to a two-bedroom apartment when the Las Vegas building boom came to a screeching halt.

Or Paul Lechner, who, with a mixture of gratitude and dejection, accepted a job stocking shelves at a Super Target after two years and hundreds of applications failed to land him a position in advertising, the field for which he trained.

Yes, the stock markets have largely rebounded. Housing and car sales are back up. And though job creation can't quite keep up with new unemployment claims, the economy is growing again.

But, if "recovery" means getting back to where you were before things fell apart, many aren't even close. To people like Lechner, 43, who came to North Carolina's Research Triangle full of hope for a bountiful future, it's meant resigning himself to lower expectations:

That any mental stimulation he gets will come from crossword puzzles, conversations with his wife or the weekly pub trivia nights with the guys — not from his work. That if he ever manages to get another job in advertising, it'll probably be too late for any awards or recognition. And that his 4-year-old son, Jerry, will likely be his only child.

"An optimist sees the glass as half full. A pessimist sees the glass as half empty. I see the glass as twice as big as it needs to be," Lechner says.

The American landscape is littered with huge and half-empty glasses, and men and women like Paul Lechner.

___

Af Shirinzadeh holds out a preserved human lung and smiles as two young women make grossed-out faces.

"Step on up," he says. "There is no teeth on this one. It doesn't bite."

The joke draws the women in, and within seconds they are holding actual human organs while Shirinzadeh talks to them about the science behind what they are feeling. He beams.

As a docent in the "touch booth" at "Bodies ... The Exhibition," Shirinzadeh gets to lay his hands on human bodies, albeit dead ones.

"I'm so grateful for this job," says the 38-year-old suburban Atlanta man, who was laid off last year from his job as a chiropractor and spent six months on unemployment looking for any kind of work. "I'm able to educate others, and share my knowledge, and keep myself sharp."

The job pays a tenth of what Shirinzadeh made as a chiropractor, and it's only three or four days a week. The layoff has forced him to rethink his plans for the future — and re-evaluate his past choices.

Shirinzadeh's wife, an elementary school teacher, has gone back to graduate school to get a credential that will give her a bump in pay. Shirinzadeh would do the same, if he wasn't already saddled with considerable college debt — and if the couple could afford regular day care for their 2-year-old son.

His father had wanted him to become a medical doctor. The son wonders if he made the right choice in becoming a chiropractor.

"I didn't think it was going to be like this," he says. "I thought, `I'll be a doctor of chiropractic. I'll work hard, save up a bunch of money, maybe retire early.' Now it's like, work until you die."

___

When the economy was up, so was Mark Sepeda.

The 50-year-old welder walked the iron atop some of Sin City's newest skyscrapers. The Encore Las Vegas Casino and the Mandarin Oriental hotel at the massive $8.5 billion CityCenter are among the more recent pleasure palaces he's helped to soar.

These days, Sepeda's view on the world is strictly earthbound.

Since being laid off in January 2009, Sepeda has been reduced to soliciting freelance auto mechanic work through online classifieds and word-of-mouth referrals. His family's tiny apartment is just east of the Las Vegas Strip, within sight of the skyscrapers he helped build.

They used to live in a house in Gardnerville, a Carson Valley town not far from the 24/7 casinos of Reno and the serene beauty of Lake Tahoe. "We had a huge backyard over there, too," he says. "You could park your boat and your RV back there and still be able to drive your vehicle around it."

Now, the kids sleep two to a room (two of Sepeda's daughters share a bed with the family pit bull, Milo). At night, Sepeda and his wife, Sue, bunk on the living-room floor.

When Sepeda was working iron, it was a matter of pride that his wife could stay at home and focus on the kids. She recently took a job at a car wash that pays $15 an hour.

"Now is when the wife and the kids step up to help me, because I can't do it all by myself no more, like I used to," he says. "They used to want for nothing."

When Sepeda isn't working on cars, he spends his days training for other hands-on jobs and trying to find steady work anywhere he can.

He's been close to getting hired as an apartment maintenance person at a couple of complexes, but needs certification in pool maintenance. And after some night school, he's seeking to become a card-carrying smog technician.

"I've learned this town is about cards," he says. Another thing he's learned: In this economy, you make your own luck.

___

Joe Lechner was a plumber, Betty Lechner was a secretary, and they drilled a simple truth into their elder son's head: A college degree was the key to success. It had taken him 16 years and three different schools, but Paul Lechner finally got it — a bachelor's degree in advertising, with a concentration in copywriting and minor in marketing.

Lechner had a half-dozen good years in his chosen field before he was laid off in 2006. His wife, Julie, had just given birth to their son, and it seemed a perfect time to move closer to the grandparents, to start anew.

After much scouting, they decided on Holly Springs, N.C. — a Research Triangle bedroom community halfway between his parents' home in upstate New York and their winter retreat in Florida.

"Looking back on it, ... the horizons were WIDE open," he says. "There was a lot of promise and prospect. We bought a very nice house in a really nice neighborhood in a great section of town."

They landed just as the boom was going bust. Agencies were downsizing, not hiring; the freelance work that had kept him afloat slowed to a trickle, then dried up completely.

Finally, after two years of fruitless searching, Lechner took a job stocking shelves at a Super Target, because it offered affordable health insurance for Julie and Jerry.

"It was intended to be something that was a way to stop the bleeding," he says.

If his father didn't hold the mortgage on their house, Lechner says, "we'd have been living in a cardboard box six months ago." The last movie he and his wife saw at the theater was "The Dark Knight" — two summers ago.

The trivia nights at Woody's Sports Tavern in nearby Cary are Lechner's only "extravagance." He doesn't just enjoy them — he needs them.

When the waitresses come around for beer orders, they know not to bother asking Lechner. He always has iced tea — not because he's a teetotaler, but because the refills are free.

Two hours and several baskets of Buffalo wings later, Lechner and team "Vernon T. Money" have scored their second straight victory. The $50 pot goes onto the table to help cover the tab.

"It's $14, $15 that I don't need to spend, but the effects, psychologically, are immeasurable," Lechner says. "It just FEELS good ... an opportunity for me to feel like I'm actually contributing to something."

___

As head of human resources for Nationwide Auction Systems, it was Wivory Bell's job to travel around California in late 2008 and tell people they were being let go. By last April, there were so few humans left, her own services were no longer required.

The 43-year-old single mother threw herself into the job search. But she didn't just sit around the house waiting for the offers to come rolling in.

Bell volunteered with the career renewal ministry at Huntington Beach's St. Simon and St. Jude Catholic Church.

She led a 2 1/2-hour Advanced Career Strategies class at the church every Thursday, and taught Step 3 — managing your online profile — of the "Eight Steps to Career Renewal."

Bell began coaching two unemployed people each week, going over "power stories" and "elevator pitches," refining resumes and practicing job interview questions.

She also managed to boost her own resume, using her "free" time to earn her Global Professional Human Resources certification, her Corporate Wellness certification and her coaching certification. She even started classes to get her master's degree in business administration.

After hundreds of applications and 20 face-to-face interviews, the hard work paid off. On May 6, a year and a week after her layoff, the Orange County woman started a full-time human resources job at an assisted living facility just down the road from her Aliso Viejo home.

It's just a contract job, so there are no benefits. But there's a chance it could become permanent, and Bell is over the moon about having a paycheck again.

Bell — whose e-mails end with the phrase, "Make It A Results-Driven Day" — says her 14-year-old daughter, Rian, is her inspiration and biggest cheerleader. Each morning before she leaves for school, Rian tells her mother, "Make me proud today."

"If nothing else, I'm showing her that when you do reach times of adversity, it's how you handle yourself and how you're going to come out of it," she says. "Not wallowing, not self-pity. That's not how you're going to get to the next level."

___

William Marshall didn't have nearly as far to fall as some. But that doesn't make the pain any less keen.

After five years in the warehouse of a Milwaukee heating and cooling equipment wholesaler, the 43-year-old father of three had worked his way up to $14.90 an hour. In January 2009, he and his wife, Janet, emerged from a painful bankruptcy and were hoping for a fresh start.

Five months later, the company let him go, leaving the couple strapped to pay thousands of dollars in uncovered medical costs from their daughter's hip surgery.

It took Marshall seven months to land another job, with a company that locates utility lines. It paid just $12 an hour.

That job lasted about six weeks. Luckily, Janet Marshall knows how to handle money.

The 45-year-old bank payment specialist has had to get creative with meals — using less expensive foods like macaroni and cheese, hot dogs, hamburger and chicken. She's become expert at finding coupons and watching for sales.

The couple have had to put off replacing their oven, box spring and television, and they only buy the necessities. They spend little, if anything, on entertainment or clothes.

"It's sad when your kids say, 'Mom, Do you have $5?' And you can't even give them $5 because every dollar is ... allocated to go somewhere that is more important than them having $5 at the mall," Janet Marshall says.

In March, William Marshall finally landed a new job, in shipping and receiving. He's making $13.25 an hour.

The ups and downs, false starts and backward slides have taken their toll. Like many Americans, Marshall was taught that the man was the breadwinner, and he confesses to struggling with depression.

"It is hard," he says. "It's in the back of your mind all the time, like 'Man we could be doing better. We SHOULD be doing better.'"

But his Pentecostal faith tells him that things happen for a reason. Although his salary isn't quite where it was, he's with a good company, one where he seems to fit.

"I think I really have to experience the things I've had to experience to get me where I'm going," he says. "I can't really explain it, but I'm a whole lot happier than I've been in a long time."

As if on cue, the couple's dilapidated van died recently. They bought a replacement, meaning their hopes of socking away some money will have to wait a bit longer.

"Just once I want to catch a break," Marshall says.

___

Chris Cummings knew a "reduction in force" was coming at Walgreens. But with a marketing degree from a prestigious university, he thought he was insulated.

Then he heard the words, "This is going to be your last day." For a moment, he thought he might faint.

His wife, Kristie, stays home to care for the kids — Kelsie, 13; Meghan, 10; Spencer, 7; Tyler, 5. Chris Cummings is the sole breadwinner.

The folks at Sprouts gave Cummings more hours, but he still didn't qualify for benefits. Even if he was eligible, he'd be hard pressed to afford the coverage.

Something as simple as the purchase of four new tires so his wife's car could pass inspection can throw the family's finances into turmoil. Cummings doesn't want to think where he'd be without occasional financial help from his family and church (a member who owns a ranch made an anonymous gift of beef).

"I feel like we're RIGHT on the edge financially of being able to make it and generally avoid having incurred too much debt to get over this bridge time," says Cummings, clad in his bright-red "Team Sprouts" T-shirt.

Bagging groceries is not exactly mindless work, but it is hardly intellectually taxing. Cummings confesses that his mind sometimes wanders to the job applications he's sent out, the positions he's competing for.

"What if they don't come up?" he asks himself. "What if they don't happen?"

Cummings has heard other out-of-work professionals scoff at such menial jobs as being "beneath" them. But his parents taught him that all work is meaningful.

Besides, he has a wife and four children to feed. He can't afford such airs.

"It DOES feel good to be doing what I can and feeling like this isn't permanent, that this is gonna end, and there will be something better," he says.

Cummings doesn't regret his decision to move to Prosper. The school district is great, and he loves the community.

"The only missing piece is the employment that matches my education and experience," he says. "And I'm confident it will happen soon, and we will, indeed, prosper in Prosper."

Manufacturing Feeds the Recovery, but Can It Persist?‏

CNBC

As the U.S. economy began to show signs of life late last year, it was carried largely by an unusual leader: manufacturing. In terms of both output and new jobs created, U.S. manufacturers have posted strong numbers for several months running.

Yet with the mixed results of two regional manufacturing reports this week—the New York Federal Reserve's Empire State Manufacturing Survey and the Philadelphia Federal Reserve's Business Outlook Survey—it remains to be seen if the short burst manufacturing received from U.S. businesses cautiously re-entering the economy this spring will extend much longer.

"People had to restock shelves at some point," says Cliff Waldman, an economist for Arlington, Va.-based Manufacturers Alliance, (MAPI). "What has to happen now is real demand has to enter."

But Thursday's Philadelphia Fed survey, which covers factories in eastern Pennsylvania, southern New Jersey and Delaware, suggested that business demand remains tepid. Despite a slight increase in the survey's diffusion index of current activity—its most comprehensive measure of manufacturing conditions—certain line elements dipped, including an eight point drop in new orders.

"Domestic demand, while recovering, is not exactly a barnburner," says Waldman.

The Philadelphia Fed survey also revealed a softer-than-anticipated outlook on factory hiring. Manufacturing employment has been a bright spot in an otherwise bleak job market, adding 101,000 jobs since December 2009, according to the U.S. Bureau of Labor Statistics. While both the Philadelphia Fed and the Empire State survey, released Monday, recorded positive readings for May hiring, they also found future employment outlooks tied heavily to business demand. Forty-three percent of the Philadelphia-region factories who reported no present intention to hire further employees indicated uncertainty over product demand as the "most important" reason why they were keeping ranks trim.

As a sector whose share of the economy has only shrunk with each passing decade—manufacturing accounted for 11.5 percent of total GDP in 2008, versus 21.3 percent in 1978—its current performance is hard to appreciate when speaking in relative terms. Still, U.S. manufacturing remains a positive indicator for economists analyzing a nascent economic recovery.

Omair Sharif, an economist for RBS Securities, remains unfazed by any recent pullback in manufacturing's strong run for 2010.

"Philly and Empire reports still point to very healthy growth in the manufacturing sector," says Sharif. "[Both] show continued growth in factory activity in May, even if it is somewhat slower than it was in April. Because the reports run through the first half of each month, my sense is that some of the slowdown may have had to do with caution on the part of firms due to the escalation of the European debt crisis."

Global markets stretched and shaken by a historic economic downturn will likely continue to impact the fate of U.S. manufacturing. An Asian-led export rebound has had strongly positive implications for the sector, as booming Asian economies have stepped up their demand for American goods. Yet with shaky European markets threatening to unsettle business operations worldwide, manufacturing could take fresh hits just as quickly as it gains, leaving its progress caught in a murky middle.

"It's an uneven global recovery to say the least," says Waldman. "My best guess in manufacturing output growth is moderation."
 

Tracking Economic Recession And Recovery In America

Gov Monitor

Inflation-adjusted gross domestic product (GDP) grew at a rapid 5.9 percent annual rate in the last quarter of 2009, the fastest economic growth rate since the third quarter of 2003.

But that growth may simply be due to inventory replenishment and, if so, is unlikely to persist. Consumer spending rose in January, but house prices fell.

The unemployment rate remained steady at 9.7 percent in February, but long-term unemployment (unemployment of six months or more) hit a record high.

The nation lost 36,000 jobs in January, slightly more than it lost in December but many fewer than it lost in previous months. Even if recent modest job losses prefigure a return to new hiring, the kinds of large, sustained job gains that would be needed to bring the unemployment rate down seem unlikely in the near future.

The MetroMonitor, an interactive barometer of the health of America’s metropolitan economies, looks “beneath the hood” of national economic statistics to portray the diverse metropolitan landscape of recession and recovery across the country. It aims to enhance understanding of the local underpinnings of national economic trends, and to promote public- and private-sector responses to the downturn that take into account metropolitan areas’ distinct strengths and weaknesses.

This edition of the Monitor examines indicators through the fourth quarter of 2009 (ending in December) in the areas of employment, unemployment, output, home prices, and foreclosure rates for the nation’s 100 largest metropolitan areas.

It finds that:
The economic recovery spread steadily during 2009, with all of the 100 largest metropolitan areas registering growth in output during the fourth quarter of the year. The number of metropolitan areas that had a quarter-to-quarter gain in output rose from 19 in the second quarter of 2009 to 89 in the third quarter to 100 in the final quarter. With only two exceptions, once output began to increase it continued to increase in subsequent quarters. (In Baton Rouge and Portland (OR), output grew in the second quarter of the year, fell in the third quarter, and then grew again in the last quarter.)

Employment recovery has been much less widespread and less consistent than output recovery. The number of metropolitan areas that had quarter-to-quarter employment growth rose from six in the second quarter of 2009 to 14 in the third quarter to only 20 (Albuquerque, Austin, Charleston, Fresno, Harrisburg, Jackson, Louisville, New Orleans, Ogden, Oklahoma City, Oxnard, Phoenix, Poughkeepsie, Provo, Raleigh, Rochester, St. Louis, Toledo, Virginia Beach, and Washington) in the last quarter. Job growth in one quarter was no guarantee of continued job growth in subsequent quarters. Of the six metropolitan areas that gained jobs in the second quarter, all lost jobs in the fourth quarter, although four gained jobs in the third quarter. Of the 14 that gained jobs in the third quarter, only four continued to do so in the fourth quarter.

A substantial minority of metropolitan areas had made a complete output recovery by the fourth quarter of 2009 but only one had made a complete jobs recovery. Twenty-eight metropolitan areas had recovered their pre-recession levels of output in the fourth quarter, including Washington, DC, which never lost output during the last five years. However, only McAllen had regained its pre-recession employment level (as well as its pre-recession output level).

Sixty-three of the 100 largest metro areas lost a greater share of jobs eight quarters after the start of the Great Recession (the fourth quarter of 2007) than they did during the first eight quarters after the start of any of the previous three national recessions. Eight quarters after the start of the national recession, the 100 largest metropolitan areas combined had lost 4.6 percent of the jobs they had at the start of the Great Recession that began in 2007, compared to 1.9 percent for the 2001 recession, and 1.8 percent for the 1990–1991 recession. However, in the 1981–1982 recession, the 100 largest metropolitan areas had grown 0.1 percent in the first eight quarters after the start of the national recession. In general, the metropolitan areas that ranked lowest on the Monitor’s overall index (i.e., those that suffered most during the Great Recession and subsequent recovery) were also ones in which the jobs recovery was weaker after the Great Recession than after all three previous recessions. Those that ranked the highest were also ones in which the current recovery was stronger than after one or two of the previous three recessions/recoveries.

Housing markets remained weak, with house prices falling in all of the 100 largest metropolitan areas between the last quarter of 2008 and the last quarter of 2009. In contrast, 49 metropolitan areas showed house price gains between the third quarter of 2008 and the third quarter of 2009. Foreclosures continued to grow in most metropolitan areas in the fourth quarter; 56 metropolitan areas had increases in the number of real estate-owned (REO) properties during that quarter, although the 100 largest metropolitan areas combined registered a slight decline in their REO rate. The fact that economic recovery was beginning to occur despite continued weakness in housing markets suggests that continued economic recovery may not hinge on a real estate recovery.

While the nation as a whole had almost no job growth during the last decade, 17 metropolitan areas had double-digit job growth and 34 lost jobs during that time. The 17 metropolitan areas with double-digit job growth from the fourth quarter of 1999 to the fourth quarter of 2009 were all located in the South or West: Austin, Bakersfield, Boise, Cape Coral, Charleston, Houston, Lakeland, Las Vegas, McAllen, Ogden, Orlando, Phoenix, Provo, Raleigh, Riverside, San Antonio, and Washington. Notably, several of these metropolitan areas suffered severe job losses during the Great Recession as a result of the collapse of their housing markets such as Raleigh real estate, but those losses made only a modest dent in the enormous job gains that occurred in these areas earlier in the decade. The 34 metropolitan areas that lost jobs during the decade were located mostly in the Northeast and Great Lakes regions. They included not only metropolitan areas suffering from the continued loss of manufacturing jobs but also the high technology centers of San Jose and San Francisco.

Because of the Great Recession combined with pre-recession employment trends, 26 metropolitan areas lost 10 or more years of job growth, while 17 lost three or fewer years of job growth. In 26 metropolitan areas, employment in the fourth quarter of 2009 was at a level that had not been seen for 10 or more years. These areas were generally ones that rank low on our overall index, and many of them had been losing jobs even before the Great Recession began. At the extreme, Detroit, Youngstown, Dayton, and Cleveland had employment levels in the fourth quarter of 2009 that they had not had in more than 20 years. In contrast, there were 17 metropolitan areas where employment in the fourth quarter of 2009 was at a level last seen only three or fewer years ago. In these areas, which rank high on our overall index, the Great Recession made a relatively small dent in a high pre-recession job growth rate. In the metropolitan areas that suffered the most from the collapse of their housing markets (and that, therefore, were among the places that ranked lowest on our overall index), the Great Recession resulted in a loss of four to eight years of job growth. In Las Vegas, for example, employment in the fourth quarter of 2009 had dropped back to the same level it was at in the fourth quarter of 2004.

Overall, the economic indicators for the nation’s 100 largest metropolitan areas reinforce the national story of a weak, tentative, and jobless recovery.

However, vast differences in performance continued to separate the metropolitan areas that the recession hit the hardest from those less affected.

And when the Great Recession and its recovery are compared with previous recessions and recoveries, or when their impacts are considered in tandem with long-term job trends of the last decade, the contrasts between metropolitan areas are similar.

Gloom at Small Firms Clouds Outlook for Strong Recovery

The Wall Street Journal

A yawning gap has opened in the early stages of the economic recovery between big companies and small businesses, with the former enjoying access to credit and growing global markets and the latter hurting badly on both fronts.

This dichotomy will likely slow the recovery, since smaller firms are typically quick to hire and invest in an upturn.

The dour attitude of small business stands in contrast to indications of a broader recovery. The U.S. economy grew at a 5.9% annual rate in the fourth quarter as it shook off the recession. But a revival in optimism by smaller companies has been absent.

The National Federation of Independent Businesses' Small Business Optimism Index fell 1.3 points to 88.0 last month and has remained in a narrow band between 86.5 and 89.3 since April 2009. That range is below where it was in the depths of the early 1990s recession.

Meanwhile, big companies have seen a snap-back in sales and profits. Companies in the S&P 500-stock index saw sales of $2.182 trillion in the fourth quarter of 2009, up from $2.021 trillion among the exact same 500 companies a year earlier, according to Thomson Reuters. Earnings among the group tripled to $156.2 billion over the period.

"We've clearly seen a substantial improvement in the large business sector," said Jan Hatzius, an economist with Goldman Sachs Group Inc. "On the other hand, smaller companies seem to have done quite a bit worse."

There is little sign of recovery at Twin Forks Overhead Doors, which sells and installs high-end garage doors. Owner Steven Hall said the Riverhead, N.Y., firm had average annual sales of about $3.5 million until 2008, the first full year of recession. His biggest projects soon started falling through and annual sales dropped by about $1 million last year.

"My business relies 100% on consumer confidence," said Mr. Hall. "They want to make sure they can spend that money."

Small businesses accounted for a larger-than-normal share of job losses in the recession, and have been slower to recover. They racked up 45% of the job losses during the recent recession, according to David Altig, head of research at the Federal Reserve Bank of Atlanta. During the 2001 recession, by contrast, small businesses accounted for just 9% of the job losses.

There are many reasons small businesses aren't getting traction. Smaller firms are more exposed to the U.S. economy, while bigger firms get larger shares of sales from overseas economies such as China and India, where growth is still robust.

Another problem is credit. While there is mounting evidence that small-business loans have become easier to come by in recent months, credit still remains tight. In the most recent NFIB survey, 34% reported regular borrowing in February, which was a two-point improvement from the previous month but still low by historical standards.

The lending squeeze is especially hard for small firms like Pittsburgh Foundry & Machine Co., a family-owned metal casting company. Small manufacturers often buy large amounts of raw materials like steel, yet it can take up to six months to get paid for their deliveries, leaving the companies in a bind. The large capital needs and high fixed costs can make banks leery of lending to such companies, even when they have contracts.

Last month, Pittsburgh Foundry & Machine landed a contract to make ship parts for the U.S. Army, but couldn't get the several hundred thousand dollars it needed to finance the purchase of steel, iron and bronze to build parts ranging in size from a few pounds to three tons. So the company's owners used their own money to buy the metal. "The banks said they didn't want to be next in line in an investment like that," said company Vice President Sean Smith. "We're doing it ourselves out of our own pocket."

IMF: World Economic Recovery Off to Fast Start

The Wall Street Journal

Countries have emerged faster than expected from the global recession, but the International Monetary Fund warned Tuesday that managing post-crisis growth is becoming complicated by the divergence in advanced and developing economies.

The IMF presented a much brighter outlook for this year, with the world economy forecast to expand at a 3.9% pace instead of the 3.1% estimate given in October. Global growth is expected to continue to pick up in 2011, with the forecast edging up to 4.3% from 4.2%.

But the rebound will increasingly be driven by developing countries as public stimulus recedes, with the IMF trimming some advanced economy forecasts for next year given continued weak private demand and credit constraints.

"The global recovery is off to a stronger start than anticipated earlier but is proceeding at different speeds in the various regions," the IMF said in its update to the World Economic Outlook.

"Policies need to foster a rebalancing of global demand, remaining supportive where recoveries are not yet well sustained," it said.

Most advanced economies will remain "sluggish," the fund said, with the group expected to expand 2.1% this year and 2.4% in 2011. Meanwhile, internal demand in many emerging and developing markets will provide "relatively vigorous" growth, the IMF said, forecasting 6% growth in 2010 and 6.3% in 2011 for that group.

The divergence in growth paths raises significant policy challenges, as some developing countries are facing the risk that surging inflows will cause new asset bubbles at a time when many advanced economies continue to rely on extraordinary monetary, fiscal and financial support measures.

That unprecedented policy support has raised concerns about sovereign debt risk, the fund said, but it continued to warn that "a premature and incoherent exit from supportive policies may undermine global growth and its rebalancing."

The IMF acknowledges the difficult task of timing exit strategies. Once private demand becomes sustainable, countries should take into consideration concerns about debt levels, as well as asset price bubbles and currency appreciation, it said.

Emerging economies dealing with surging inflows face a complex task and the policy response should depend on circumstances, such as tightening fiscal policy or allowing currency appreciation, the fund said. But it also reiterated that some buildup of reserves or capital controls may be appropriate to address large and transitory movements.

Given growing concerns about public debt levels, the fund recommends that countries fully implement fiscal stimulus for this year, while devising credible fiscal sustainability plans. Medium-term fiscal consolidation should protect spending on the poor and forming aid while overhauling entitlement spending, it said.

Regarding monetary policy, the fund said many central banks can afford to keep rates low this year given expectations of low inflation. Countries recovering faster will have to tighten sooner, it added.

On the financial front, advanced countries and the hardest-hit emerging economies still have to deal with bank restructuring and removing toxic assets. Policy makers should remove financial support gradually, while moving ahead with reforms that will both reduce financial risk and make the banking sector more effective and resilient, it said.

Among advanced economy forecasts, growth in the U.S. is expected to reach 2.7% in 2010 and 2.4% next year. The fund said new U.S. policies to create jobs could boost growth there and globally.

The euro area is forecast to grow 1% this year and 1.6% in 2011, while the U.K. is seen expanding 1.3% this year and 2.7% next. Japan is projected to grow 1.7% and 2.2%, and Canada's economy is seen rising 2.6% and 3.6%.

Regionally, developing Asia is forecast to grow 8.4% in 2010 and 2011, with China expanding at a 10% clip this year and 9.7% next. Central and eastern Europe economies are expected to rise 2% in 2010 and 3.7% next year, while emerging economies in the Western Hemisphere are forecast to grow 3.7% and 3.8%. Africa is expected to grow 4.3% and 5.3% over the next two years.