On the heels of Christmas, all eyes turn to the economy and the outlook for 2010. This time of year, organizations big and small look to implementing, or in some cases, completing their business/operational plans and this year’s outlook is significantly brighter than last year.

Last year, I bet that the economy would improve in the 3^rd and 4^th quarter. Fortunately, it did begin to rebound in the 3^rd quarter. There was simply too much money pumped into the system for it not to improve.

So what can we expect from 2010?

Improvement. Despite the recent negative employment news, it definitely looks like the employment market has hit bottom and by February we should start to see signs of an improving labor market. Based on the Fall numbers, auto manufacturers should start to become profitable again, but overall consumer spending will remain weak and choppy. Too much wealth has been destroyed in this recession and it will take some time for real income to rise, which is necessary for strong retail growth.

The dollar remains weak giving strength to exports, local and state government continues to struggle, and commercial real estate continues to tank.

On the plus side, the first half of the year looks positive, especially for stocks. However, inflation or fears of inflation and higher rates becomes the story of the second half of the year.

2010 looks positive. It is 2011 that I’m worried about.

The latest Rasmussen Employment Index finds that only 26% of American workers now say their employers are laying people off. That’s the lowest number reporting layoffs since last November.

However last week’s ADP survey suggested that job weakness was still high and the Labor Department’s employment report indicated that more jobs were lost in September than in August.

I think it is safe to say that a V shaped recovery is out of the question. There is just not enough consumer strength or wealth to sustain a quick improvement in consumer expenditures. Until real wages grow faster than inflation, we will not see any major upticks in growth.

A slow, steady, but uneven march upward is the most likely scenario. Think 2% growth for next year. Not strong, but enough to keep us steady.

Looks like the economic turn has started. Here are a few signs that July may be the turning point.

First, owners of small businesses say they see signs of economic improvement. The Discover Small Business Watch, the card company's monthly survey, found that 30% of small businesses believe the economy is getting better, up from 26% a month earlier.

Second, the “clunker credit” has done more for auto sales than I think anyone expected. Who knew that the program would be this effective at wiping out excess auto inventories?

Third, while we are facing a jobless recovery, it looks like the continuing losses are beginning to ameliorate. More people are being recalled to work and we should start seeing lower new claims for unemployment in the next few weeks.

I’m guessing that we will see positive 3^rd quarter economic growth. The clunker program virtually confirms positive news. It looks like we can mark July or August as the inflection point for recovery.

I do have a feeling that this will be one of the weakest recoveries in history. Employers will squeeze out significant productivity gains (read longer work hours) and try to hold down wages ( read continued losses in personal income) to bolster improved profits. The economy is about to grow, just a slower than we all would like.

Last week’s jobs reports was a shocker to many. We lost more jobs in June than during any month in the previous two recessions. The size of the jobs loss was discouraging and more than anyone thought.

While it appears that we are starting to recover from a near financial collapse, we still have to dig ourselves out of a very deep hole. A lot of household wealth has been destroyed in the past year and most economists are forecasting another 1 to 2 million more job losses, about the size of the last two recessions.

Things are starting to improve and corporate earnings are beginning to improve. But it will be a few more months before we see the signs of good times and significant growth.