The U.S. economy will emerge from recession by growing more than 2 percent in the current and fourth quarters on a dramatic reversal in inventories, but growth next year will be tepid, a UCLA Anderson Forecast said on Wednesday…”The structural problem facing the economy is that you have wealth-impaired consumers that need to repair balance sheets and many need to repair balance sheets because they are facing retirement or education costs for children with less than they thought they had,” said David Shulman, a senior economist at the UCLA Anderson Forecast group.

So…looks like the economic forecasters – who never get it right except when they can follow an existing trend – are looking for the “new normal” to be about 2% rather than the 1 to 2% (average, say…1.5%) called for by the PIMCO guys and yet, far less than the 3 to 3.5% of the last few years.  Let’s see, what has to change from last quarter?  In rough figures, without government stimulus spending, we would have printed a -6% annualized growth rate for 2nd quarter.  So, now the remaining government stimulus spending along with the inventory swing is supposed to kick us into the 2% growth level for the next 2 quarters.  Inventory building in anticipation of a yet-to-come consumer spending rebound and continuing government spending.  The government has no inclination to stop spending but will that spending result in a healthy consumer?  A consumer who can eventually take the place of the government spending?  You be the judge – but it’s certainly not a slam dunk for the consumer to bounce back the way it’s being anticipated.

Gary shilling offers some reasons why he thinks the economy will not just “snap back”.

The WSJ reports that the minutes of the August FOMC suggest a FED determined to put a bright outlook on a very uncertain situation.  Basically, the “recovery” depends on an increasingly unemployed consumer deciding to spend more to take the place of federal programs.

This “blurb” from the minutes (emphasis added) as quoted at Calculated Risk shows the FED recognizes that a “recovery” is based on little more than “hope” that consumers will become more willing to spend as a result of their recent “increase in wealth” from all the bank-manipulated stock market gains and some other things the consumer could care less about:

The new estimates of real disposable income that were reported in the comprehensive revision to the national income and product accounts showed a noticeably slower increase in 2008 and the first half of 2009 than previously thought. By themselves, the revised income estimates would imply a lower forecast of consumer spending in coming quarters. But this negative influence on aggregate demand was roughly offset by other factors, including higher household net worth as a result of the rise in equity prices since March, lower corporate bond rates and spreads, a lower dollar, and a stronger forecast for foreign economic activity.

The August FOMC minutes could as easily read something like: “The Federal Reserve believes that a substantial case can be made that the consumer will win the lottery and go on a spending binge later this year”…