Rowe Price, calls "dyna-minimalism." He thinks that businesses and households have saved and paid down debt enough to position the economy for a dynamic recovery, but "the minimalism comes in the trajectory of recovery that I expect, which will be restrained by this longer tail of financial-sector restructuring even after the 'real' sector has restructured substantially, and the more restrained outlook of credit expansion going forward," Levenson said in an interview.
He means that lenders will be tougher about making loans, limiting consumers' ability to spend and thus braking business growth. Consumer spending drives about two-thirds of U.S. economic activity.
"As sharp a recession as we've had, we would expect to see a much more rigorous bounce back than I am forecasting," Levenson said, blaming today's extraordinary financial conditions for the weak outlook.
This recession, which was brought on by a near-freeze of credit across the globe, didn't follow the usual business cycle, so the unfolding of the recovery will be equally unpredictable.
"The things that normally happen in the business cycle: consumption starts to eat up the slack and very quickly turns into production, which then demands more investment," said Marty Regalia, the chief economist for the U.S. Chamber of Commerce.
Translation: Consumers must buy enough to reduce businesses' inventories, forcing them to reorder, thus inducing manufacturers to make more goods. Manufacturers must buy more raw materials. All these goods move on trucks, trains, ships and planes, and as this happens the gears of the economy shift into higher cycles.
However, many economists fear that government stimulus spending will drive economic activity, not the consumer. That opens the possibility that once the government's billions of dollars slow to a trickle, another dip into recession could follow.
"The economy has got to be running on its own by the middle of next year, and it has got to be running on its own in a long-term sense," Regalia said. He worries that falling stimulus spending, higher interest rates and rising inflation could combine to choke off recovery by late 2010 or early 2011.
Regalia fears that the unemployment rate will top 10 percent by early next year and stay high, dampening vital consumption.
"I'd say we're going to be looking at 9-plus all of next year and into 2011," he said.
That scenario would leave the U.S. economy vulnerable to shocks from energy prices, natural disasters or other surprises.
"When you are growing weakly ... when the economy is not hitting on all cylinders, it becomes more susceptible to problems we all know are going to come up. We just don't know in what form," Regalia said.
Mounting U.S. budget deficits and expanded lending by the Federal Reserve have many economists worried that inflation down the road may be harder to tame than the Obama administration thinks.
Investors continue snapping up U.S.
