Insights · January 5th, 2010
Outlook 2010, by Glen Hiemstra
I recorded this outlook for 2010 on December 30, 2009. I decided this year to look at five areas.
The first is demographic. I think that the biggest story of 2010 is the aging society, which will fly under the radar somewhat as a news story as more urgent but ultimately less important issues dominate. This is the major trend of 2010 because as of January 1 of this year we were 365 days from the day the first Baby Boomer turns 65 in the U.S. After that, for nearly two decades every 8 seconds or so another boomer will turn 65, and we will be living the long anticipated Age Wave. In a sense then, 2010 marks the final year of preparation. Eventually the age wave, a global and not just a national phenomenon, will impact almost everything – housing, transportation, jobs and the economy, social services, etc.
The primary technology story is that developments in tech will lead the economic recovery in 2010. Among the leading innovations to watch for as they emerge into the market are wider deployment of true telepresence, early adoption of 3D television as 3D moves beyond the movies, strong growth in tablet communication devices from book readers to advanced internet tools, and very strong growth in mobile applications as more and more internet action moves from computers to hand held devices, mostly smart phones. But the number one tech story of 2010 may be the announcement of the $100 genome. Decoding a full human genome took millions of dollars to begin, then dropped into the hundreds of thousands, then the tens of thousands. On the horizon, to appear this year or soon after is the $100 genome – send in a cheek swab and get a full reading of what is currently known about your genetic make up. As this kind of cost level is reached we’ll see a quantum leap in utility of genomic knowledge.
2010 may be the year that Peak Oil is confirmed. At the very least the next decade will tell the story. By peak oil we mean the moment when oil production reaches its historical maximum, and we begin going down the backside of the curve. At the moment there will still be decades of oil use ahead, but the race to alternatives will intensify. Within the energy community debate has raged regarding whether a global peak was already reached in 2005 or 2007. Assuming the economic growth resumes in 2010, and thus eventually demand begins to grow, we should discover whether supplies can be increased, or not. Whatever the answer this will be important information.
The other important energy story of 2010 is natural gas. Huge increases in reserves are anticipated as more sophisticated methods for injecting liquid materials into fractured rock to force out previously inaccessible gas look promising. But there is a potential cloud on the horizon, which may come to a head in 2010 and that is impact of such development on ground water. Initially the industry suggested that as much as 90 percent of the injected material comes out with the gas, but actual experience is suggesting that as much as 80-90% of the injected material stays underground. Where this has potential impact on future water supply, look for the government to get involved, appropriately, in regulation.
I am among the relatively small number of forecasters who anticipates a more robust recovery in 2010 than the conventional wisdom assumes. I make this prediction based on three factors. First, the great recession, while triggered by the financial collapse, has turned out to resemble typical recessions in terms of inventory draw down. We are now at a point where inventories must be rebuilt, manufacturing indexes are looking more positive. If momentum builds then the recovery may look more traditional than expected. Second, people are simply tired of this recession. A great deal of economic activity depends on psychology. The holiday shopping period just completed suggests that people are interested in returning to normal, and again if momentum builds then this psychology will help. Finally, the global economy has become a driver rather than a result of the U.S. economy, to a noticeable degree. Thus as global growth picks up, especially in developing economic leaders, this will pull the U.S. along. For these reasons I expect that when 2010 closes we’ll conclude that the recovery, while not rapid, has been better than expected.
Conventional wisdom is awash with the story that we are now entering a period of jobless growth, that even if the GDP grows, jobs will lag and may never come back. A permanent unemployment rate of 6-8% is forecast by some. All of this sounds suspiciously like the talk that followed the last great recession in 1981-82 and again in the early 1990’s. I remember many predictions that a new era of jobless growth was at hand, that new technologies and globalization meant that jobs would simply never return to the U.S. Did not happen then. Will not happen now. It is completely logical to assume that job growth in 2010 will be slow, and we do have to recover 10 million jobs to get back to the 2007 starting line. That will take a while. History says jobs will return. Hysteria says they will never come back. Bet on history in 2010.