Stability seems to have returned to the economy, according to two experts who spoke Thursday, Jan. 5, at the 20th Annual Economic Forecast. Unfortunately, little significant growth is expected in 2012.
“In the light of … what is forecast to happen in 2012, I think the best we can look for is no rise in unemployment,” said Dr. William “Woody” Hall, senior economist at the H. David and Diane Swain Center for Business and Economic Services at the University of North Carolina Wilmington’s Cameron School of Business.
“The housing market is kind of emblematic of what is so frustrating about this economic recovery… Even though the homes are affordable, they’re not attainable,” said Richard Kaglic, an economist at the Charlotte branch of the Federal Reserve Bank of Richmond, Va. He stated that he was sharing his own views rather than representing the Federal Reserve.
The breakfast event was presented at the Wilmington Convention Center by accounting firm RSM McGladrey, the Greater Wilmington Chamber of Commerce and Wilmington Industrial Development Inc. Rob Wagner, managing director of the Wilmington branch of RSM McGladrey, introduced both speakers.
Kaglic began with an overview of the economy, saying indicators were mixed but generally better than expected. However, in 2011, unexpected factors including war in Libya and the tsunami in Japan hampered growth by disrupting global supply chains. More fundamental and persistent obstacles included high unemployment, moribund housing, and tremendous uncertainty led by the European sovereign debt crisis and political dysfunction in the United States.
“This is not to say that the economy won’t grow in 2012, but … it’s not going to be a V-shaped recovery,” Kaglic said.
New single-family home sales basically flatlined, Kaglic said, and the sustained rate during the last 18 months was worse than the worst of the housing slump during the early 1980s. In addition, the glut of distressed homes exerted downward pressure on prices.
Employment figures continued to be disappointing, Kaglic said. Ten quarters into the recovery, only 2.5 million new jobs were created to make up for 8.8 million lost during the Great Recession. At that rate, he said it would be another four and a half years before North Carolina would see pre-recession numbers.
Kaglic confirmed that North Carolina was underperforming the rest of the United States, partly due to its heavy concentration of struggling sectors including manufacturing, construction, the financial industry, and government. State unemployment is a full percent lower than the national average.
Hall focused on local economic data. Population soared between 2000 and 2010, and the Wilmington Metropolitan Statistical Area’s gross domestic product grew by about 2 percent in 2010 after falling in 2008 and 2009.
However, unemployment rose dramatically in 2008-09 and changed little since then. Hall said that having been a professional economist during six recessions, this was the only one he had seen when state unemployment was worse than the nation’s.
Hall said he tracked retail sales growth because that sector was a major employer in southeastern North Carolina, providing approximately 18 percent of the jobs. He said the area had a long way to go before the recovery despite some fairly healthy improvements.
Hall said that home sales had stabilized, but prices might still fall even more. Wilmington Regional Association of Realtor reported some 900 sales at the 2005 peak, but sales fell to 250 by 2008, a 72 percent decrease; by the end of 2011, sales were near 150.
Regarding prices, Hall also cited WRAR’s price reports. The average sales price fell from a 2007 peak of $290,000 to roughly $200,000 near the end of 2011, a 30 percent decrease.
Hall said the Wilmington area’s 3 percent GDP growth rate in 2011 was almost twice that of the state and nation. In 2012, he expected the local economy to match the predicted U.S. rate of 2 percent, slightly more than the expected North Carolina rate. However, since a 3 percent growth rate is needed for stable unemployment, he thought the best that can be hoped is no more job losses.