MAQUOKETA, Iowa - A senior economist with the Federal Reserve Bank of Chicago is optimistic about a turnaround in the economy next year.

William A. Strauss, senior economist and economic adviser in the Research Department at the Federal Reserve Bank, spoke Monday at the Ohnward Financial Advisor Services 2009 Economic Summit at the Ohnward Fine Arts Center in Maquoketa.

Last year, Strauss did not paint a rosy picture of the economy. But this year is different.

"We had just taken a huge hit by a financial crisis," Strauss said. "The federal government was struggling to respond with money and fiscal policies. Things were at their worst."

Strauss said the financial crisis was the worst since the 1930s. But he believes the government did the right thing with its bailouts and expanding of lending.

"We have a good reason to be optimistic," he said. "People have delayed doing things like buying homes and vehicles. That pent-up demand of activity is our real strength. I think our financial condition is well improved."

While consumers may want to buy the big-ticket items, they may find it difficult to borrow as easily as in the past.

"Consumers are looking at their spending patterns in a different manner. They will be looking at smaller homes and not looking at housing as an investment, but as a place to live," Strauss said. "Before they were being pushed to buy as much home as they could, so they could make a killing for their retirement later. I think home ownership will become more reasonable. They might even be asked to make a down payment."

But he doesn't see the same problems in lending as before.

"The markets tend not to make the same mistakes again. But they will figure out other mistakes," he said with a laugh.

Strauss said he is optimistic manufacturing will return, and there has been an upturn in the past quarter. Most manufacturers have gotten as lean as they can, so Strauss thinks more hiring is in the future.

He added that consumer spending seems to be the key to a quick recovery.

"If the labor market is not as rosy, it will be a challenge for consumer spending," he said.