In the first week of the New Year, The Conference Board's Ken Goldstein shared via e-mail correspondence the twists and turns on the road ahead for the nation's economy.

To learn the most up-to-date economic data for this region and the nation, view The Conference Board's latest Index of Coincident Economic Indicators, at www.conference-board.org.

Global Corporate Xpansion: Ken, we have talked about the economy not truly picking up until later this year; before we discuss where we are going, how did 2009 finish?

Ken Goldstein: Imagine one river spilling into another. The current in either river is clear but the point where they merge has some conflicting tides. The economic recession may be over but its impact is still not fully spent.

The recovery in the manufacturing sector has begun. We're still looking for signs of recovery in the consumer sector. Vehicle sales and holiday shopping were better than anticipated. The housing market, however, is further away from recovery than we suspected. This year starts on a note of some confusion in the numbers, which might not clear up before winter is over.

GCX: Bring us up to speed for the winter and how The Conference Board forecasts the year will play out; both nationally, and a hint as to the global economy.

Goldstein: There are some positives in the economic environment right now. Consumer spending, industrial production, and export growth are all coming back faster than expected.

Business investment is slower. The labor market is not slower than expected but is confirming consumers' worst fears and therefore confidence remains low. Lastly, mortgage defaults (residential and commercial) were weighing down economic momentum. Both may get worse before they get better.

Demand abroad is picking up sharply because recovery is underway across the globe.

There are two problems here. First, most of the foreign growth is in the Asia/Pacific arena. Europe is lagging behind Asia and North America, and will for some time.

Second, most of the recovery across the globe is in the industrial sector, setting off fears of inflation (crude is already up to $81/bbl) and possibly leading to interest rate hikes sooner rather than later. That serves as an extra hurdle for the economy to jump over.

GCX: On a regional basis, detail how the Southwest United States will fare in 2010.

Where are the strengths in the region; places to watch out for; and what areas of the region are challenged?

Goldstein: In a broad sense, the very steep recession didn't spare the Southwest. Moreover, some parts of the region (especially in the Phoenix area) were hard hit by the subprime debacle. And, recent news reports of the problems dealing with violence associated with narco-trafficking have spread north of the international border. This is a small but important consideration as it disrupts some normal economic activity, just as conditions are about to return to normal.

Those markets with strong links to goods production and/or transportation are seeing recovery. Those markets more concentrated on service production are still waiting for the tide to come in. This is one reason why the unemployment rate in Arizona is almost a full percent higher (8.9 percent) than New Mexico (7.8 percent) or Texas (8 percent). But the favorable comparison is to the national rate of 10 percent or California at 12.3 percent.

The problem is that while the goods-producing sector is improving, there are few signs of life in services. Jobs in service-producing industries were 3.6 percent lower in November in Texas than a year earlier.  It was 4.9 percent lower in Arizona, and 5.6 percent lower in New Mexico.

One bright spot is the San Antonio metro area. While the turnaround in the labor market remains slow, as is the case across the board, its unemployment rate was only 5.2 percent. Home prices in the area were actually 4.7 percent higher in the third quarter than one year earlier. That's a better performance on jobs and housing than elsewhere in Texas or the Southwest in general.

At the other extreme lie the metro areas of Tucson, Ariz., and Santa Fe, N.M., where jobs and home values are still in a downward spiral. The real estate problems, residential and commercial, have led to and are fed by lingering banking and insurance problems.

They, therefore, have bigger hurdles to jump. Their exposure both to the national economy and to cross-border trade with Mexico have hurt for the better part of the last year and a half. This year could be the year where that turns into an advantage. The question is how far into the year before that changeover occurs.

There is a longer-term potential in some of these markets associated with developing solar and wind power. Both, however, are relatively instance water-usage activities.

And fights over water rights are already long entrenched in this part of the country.

GCX: As we usually discuss, what should corporations understand about the affects of the economy on their growth plans? We have talked about the survival mode for about 18 months or so. Will we see some light this year?

Goldstein: Short term, the No. 1 corporate concern is a return to profitability. The two hurdles in this path are: 1) weak demand, which will only slowly improve; and, 2) the lack of pricing power, which may not improve this year or even next year. And that explains why corporations were so busy in 2009 cutting costs, and reducing head counts. What is crystal clear that adding to head count as the economy struggles to recover will be slow. In turn, the lack of job growth will feed the need on the part of the consumer to keep household budgets tight.

This is the cycle we are caught up in right now, whether in the Southwest or any other part of the country. The only sure forecast is that breaking that cycle is unlikely to be something that develops in 2010. Maybe 2011?

Ken Goldstein is an economist with The Conference Board, and can be reached by e-mailing ken.goldstein@conference-board.org. For more than 90 years, The Conference Board has created and disseminated knowledge about management and the marketplace to help business strengthen their performance and better serve society. The organization operates as a global independent membership organization working in the public interest. Among its services, the organization publishes information and analysis, makes economics-based forecasts and assesses trends. To learn more, visit www.conference-board.org.