2010 budgeting.

LIKE MOST BUSINESSES, WE'RE preparing our company s budget for 2010 and looking for guidance on what the future holds for the economy.

A year ago, the U.S. economy was moving into full-blown recession mode while Arkansas held relatively steady. We knew 2009 would be a rough year on every front--employment, housing, credit, consumer spending and loss of savings in the stock market. For us, that would also mean pressure on marketing spending.

In some ways, the economy bounced back quicker than anyone imagined. The Dow Jones industrials have soared since March, rising to the 10,000 level after bottoming out at 6,547. Major financial institutions have repaid government bailout funds by the billions and are showing surprisingly large profits. Corporate profits generally are exceeding expectations.

But unemployment remains daunting, consumers still aren't spending at levels the economy needs, many mid-sized banks continue to struggle, the housing market remains slow to rebound and construction is anemic, as a commercial real estate bubble burst seems inevitable.

So where does that leave us? We're taking a very conservative approach on the revenue side, which means we will also hold the line on spending. We see several opportunities to exceed expectations but aren't prepared to take it to the bank.

The September revenue report for the state was a strong reminder that the economy remains precarious. A 14 percent drop in one month was alarming and resulted in Gov. Mike Beebe cutting the state budget by $100 million. The Arkansas General Assembly's first fiscal session in January could be more eventful that we imagined.

I think it will be easier for the state than local municipalities to absorb some shortfalls. Little Rock and North Little Rock have already made significant budget cuts with more likely. Then there's Pulaski County, which is handing out raises and bonuses as if money is free flowing and there aren't major needs like, say, the overcrowded jail.

Though high at 7.1 percent, Arkansas' unemployment rate remains a bright spot considering the U.S. rate is at 9.8 percent. However, we had one of the nation's largest increases in jobless claims last week, and that could indicate a rise in the jobless rate.

Jobs with Caterpillar in North Little Rock and Hewlett-Packard in Conway are developing in the coming months, but we still have not experienced all the fallout of the sale Of Alltel Corp. to Verizon Wireless. And cities like Clinton, E1 Dorado, Booneville and Fort Smith have suffered substantial job losses that simply can't be replaced overnight.

I continue to wonder about the impact of $365 million a year being spent on lottery tickets. That's discretionary money that isn't being spent on goods and services, and that would have substantial economic impact with dollars being reinvested in the economy.

A college president told me the other day that he and others still weren't sure what kind of impact the lottery scholarships will have on the colleges. I was stunned. He explained tuition only pays for a fraction of college costs, and state appropriations hadn't kept up with enrollment growth even before the lottery scholarships. I suggested that lottery scholarships would mean less money that a student would have to borrow, but apparently the consensus is that students will continue to borrow as much as they can to live on.

Overall, I think we have reason to be cautiously optimistic about 2010. The world economy survived the credit meltdown and a near collapse of the financial market last fall. Job losses have slowed dramatically, and we'll start to see growth again next year. Consumers will finally tire of saving money and start to spend again.

Don't forget to register to attend the second annual "Commerce Arkansas: A Knowledge & Networking Experience" event on Nov. 3 at the Statehouse Convention Center in Little Rock.

You can visit the Web site at www.commercearkansas.com to register for free admission to attend. We're finalizing what will be an incredible lineup of business seminars, and we will be presenting the first CFO of the Year awards at the luncheon.

Jeff Hankins can be reached via e-mail at [e-mail] or followed on Twitter @JeffHankins.