Sonders: Recovery Becoming Self-Sustaining

Charles Schwab’s Liz Ann Sonders, whose calls on the start and end of the Great Recession proved very accurate, says she thinks the U.S. economy is entering the second phase of its recovery, with the recovery becoming self-sustaining.

“I don’t want to say we’re off to the races again, because I don’t think we’re going to have really robust growth,” Sonders tells Harlan Levy on Seeking Alpha. “It’s not likely in a deleveraging environment, and the fact that we’re still dealing with this debt problem in the U.S. But I think we’re in the next phase of the recovery that is a little bit more self-feeding that improves confidence and improves spending, which increases demand, which makes businesses hire again, and you get a positive circle.”

Sonders also says that high government debts put a cap on growth, “but that does not mean we’re mired in no-growth territory. We’re likely to see better growth this year than we saw last year.” She says the “heart of this recovery” will be the manufacturing sector, which she says is a welcomed change after the last growth cycle, which was driven by “paper” — i.e., financial engineering.

Sonders also offers an interesting insight on the strong recent jobs numbers, noting that the household data in the Labor Department’s survey has been even better than the headline payroll number. “Household employment was up 631,000 in January. That’s a huge number,” she says. “You also have to pay attention to the fact that he household survey tends to pick up people who have become self-employed or who started a business and small businesses that aren’t picked up in the payroll survey, which tends to capture larger companies, and we know that’s where we’ve been lacking job creation. Where our economy tends to have its greatest job creation is in the small business sector, and it’s in that area where we’re starting to see some life.”

As for the stock market, Sonders says moderate economic growth could bode well. “If we stay in this 3 percent growth range, and that helps keep inflation at bay, that’s a pretty good environment historically for the stock market,” she says.