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Posted 07.01.2010

State of the state: economy

With this recovery, it's back to the future

By Mike Cote

Economists, policymakers and business leaders - and anyone who works for a living - are bracing for high unemployment rates for several years to come. And we haven't seen the last of bank failures, debt hangovers and government revenue emergencies.

That doesn't mean we're not poised for long-term economic recovery. But this one mixes the bitter with the sweet.

"We're going to have high unemployment rates in this country for several years to come, even though we're going to probably return to fairly good job creation," says James Paulsen, chief investment strategist for Wells Capital Management.

"We're going to have continued bank failures for the next several years in small- and middle-sized banks. We're going to continue to have debt write-offs. We're going to have continued talk about state and local finance problems. But we're going to have economic recovery while we're doing that."

Now pause for the punch line.

"What I just described to you is the 1980s Reagan revolution recovery," Paulsen told a few hundred people gathered in Denver in May for an economic talk presented by Wells Fargo. "That's exactly what happened in the 1980s."

The U.S. emerged from a recession in 1982, and "in retrospect we consider that one of our better eras. Yet during that decade of the '80s we had very high unemployment," Paulsen said, adding toxic bank debt and bank failures to the list of mid-'80s woes.

At least this time around, we don't have big hair.

Mike Cote is the editor of ColoradoBiz. E-mail him at mcote@cobizmag.com.

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