Managing Editor
Summer might seem like a double-dip recession
Come July or August, the economy’s pullback might be so strong that people will think the country is heading into another recession.
Think again.
“It’s going to look like a double-dip,” said Wells Fargo senior economist Mark Vitner. But, he said, it won’t be.
“People are going to be convinced things are lot worse than they are,” Vitner told the Economic Roundtable of Jacksonville on Tuesday.
Not that it will seem all that great. “The recovery we have projected is very modest,” he said.
Over the summer, Vitner said the federal government stimulus money will slow, meaning jobs created by the funds will slow, too. Vitner said that 80 percent of the economic growth in the last two quarters of 2009 came from stimulus money.
“The bulk of that stimulus will be behind us by March,” he said.
Add to that the fact that many city budgets are in peril, economic activity will slow, he said.
By now, it’s common knowledge that the nation’s worst recession since the Depression began in December 2007 and likely ended, at least technically, late in 2009.
Yet unemployment remains high and jobs aren’t returning with any strength. “There were 8.5 million jobs lost in the recession. It’ll be 2015 to 2016 to add back jobs,” Vitner said. He said the nation was adding 100,000 people a month looking for work.
He said 27 weeks is the average duration of unemployment, which he called a historic high. He said if a person is out of work that long, “you’re not going back to what you were doing.”
People who must change occupations generally earn less. Those who change industries earn even less.
On top of that, the income earned by people from working, as opposed to income from investments or other sources, has fallen 20 percent since the recession began.
Unemployment remains at or near the double-digit range locally, statewide and nationally and Vitner said the unemployment rate has not clearly peaked.
Vitner showed a map color-coded by the jobless rate. Three areas dominated with 6 percent or lower unemployment. First, the Plains and the Upper Midwest, “where there are no people.” Second was collectively Washington, D.C., New Orleans and Texas, which have a lot of government employment. Third was northwest Arkansas, “home to Walmart.”
He said the temporary U.S. Census jobs to handle the 2010 population count would start to show up in payrolls now through May, but would show up mainly in jobs at staffing firms.
Where’s the good news?
Vitner said the economy grew at 2.2 percent in the third quarter of 2009 and 5.9 percent in the fourth, “pretty strong growth.” Wells Fargo predicts growth at 3.4 percent in the first quarter, which ends March 31, and 2.9 percent for all of 2010.
Vitner said job growth is on the way up and he expects the battered housing market to show signs of recovery by 2012. As for housing permits in Jacksonville, he said “zero is as far as you can fall and we’re close to that.”
The commercial real estate market, which is expected to tumble farther than it already has, also should work out of recession in four to five years, he said. “We didn’t overbuild,” he said. “We overbought.”
Then there are state and local finances in turmoil, which he considered a greater threat to the recovery than real estate.
“On that cheery note,” he said, “we’re optimistic.”
“We tend to underestimate growth,” Vitner said. “The fact is, conditions don’t have to be perfect for the economy to grow.”
Vitner, whose presentation was titled “Looking past the Great Recession,” was the roundtable’s last speaker of the season. Meetings resume in September, ostensibly a year after the recession ended.
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