Posts filed under 'economy'
October 3rd, 2009
And I thought I was a pessimist.
According to a study released last week by a pair of economists at Rutgers University, the economic slowdown will persist long after even I had predicted.
Think 2017. That’s how long the authors expect it will take to get back to pre-2007 levels — and that doesn’t factor in job growth.
It is, to say the least, a sobering report, calling the first 10 years of the century the Lost Employment Decade. In fact, it marks the first time since the Great Depression that we’ll record a loss of jobs over the course of a decade.
To put this new experience into perspective, during the final two decades of the 20th century, the nation gained 34.4 million private-sector jobs. Today, it appears that we are “destined to lose more than 1.7 million private-sector jobs” in this decade, according to the study.
But then there’s the growth of the labor force. The Bureau of Labor Statistics expects the work force to grow by 1.3 million people through 2016. So just to stay even, we’d have to find an additional 1.3 million new jobs as well as the 7.6 million lost through September.
One of the more ominous developments found by the authors, James Hughes and Joseph Seneca, was the decline of the service sector. In previous recessions, it represented a small part of the job losses, with most of the drops coming from manufacturing and construction.
In the 1981 recession, for example, job losses in the service sectors — which covers a broad swath of industries, from financial consultants to attorneys to hotel employees — registered about 2 percent of overall job losses.
Lately, however, the number has skyrocketed, accounting for more than 50 percent of job losses, according to the study.
Hughes and Seneca cite a few things that have hampered job growth throughout the decade, including the cost of health care benefits. Indeed, why create more jobs when the cost of the additional workers’ health care benefits could bankrupt you?
On the other hand, some companies may have registered productivity gains, enabling their output to grow without adding to their employment rolls. This could indicate a more efficient economy at work.
Still, the bleak reality has some far-reaching implications, including a significant rise in the competition among states for industries that will bring jobs.
This, of course, means there are opportunities out there for communities like ours. And while cities and counties have limited control over their overall economic environment — state policies tend to be larger drivers, not to mention that Midwestern communities lack Arizona’s climate and California’s coastline — taking advantage of any growth means we will succeed only if we step up our game.
As always, companies looking to relocate have a number of priorities: ready availability of educated or trained workers, access to the company’s markets, a public infrastructure that provides a high quality of life to its workers and high-performing schools.
Looks like Rockford has its work cut out for it.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
August 22nd, 2009
The way I see it, there are three fairly significant hurdles in the path of any real economic recovery, which is why I’m truly puzzled over the joyous proclamations that we’re well on our way.
As I’ve said before, there are reasons for optimism in the wake of some better-than-expected reports in the past few months.
But here’s what I don’t get: How can we be well on our way to economic Elysium with three unpredictable wild cards still floating around out there?
In a nutshell, and in no particular order, call them crude, credit and consumers.
Start with crude. To paraphrase Leon Uris’s “Exodus,” if the kingdom of heaven runs on righteousness, the kingdoms of Earth runs on oil.
It’s been the most volatile global commodity in the past year, spiking to $140 a barrel last summer, dropping to $40 or so by December and settling lately around $70. If it spikes again, fearful consumers will pull back.
The culprit, of course, was supply and demand. Emerging markets, such as China and India, began their explosive growth in the boom years, all of which required a steady supply of crude oil.
When the bottom fell out of the global economy, growth fizzled, as did the demand for oil.
But that growth will begin again. And when it does, those developing nations will recover their thirst for oil.
Even if the growth is only a steady swing, oil prices are going to rise again. And they will keep rising. It will have a significant effect on the U.S. economy, which consumes a quarter of world production every year.
Then there’s credit. Or rather, there isn’t. Much.
Certainly, financial institutions no longer are in the full-scale lending retreat that struck in October and froze the world’s economies for months.
But for all practical purposes, lending remains stunted. And credit is to businesses what gasoline is to your car: It’s the business community’s lifeblood. It can run on its reserves for a while. But at some point, you have to fill it up again.
It’s going to have substantial consequences for any sort of recovery.
And consumers? Surely by now you’re aware that consumer spending has made up 70 percent of the economy.
To put it another way, the national economy is an engine running at 30 percent power without it.
There have been few signs of growth in consumer spending. And still-rising unemployment numbers don’t inspire a lot of confidence, anyway.
Rockford stores suffered worse than most in May, with revenues dropping 13.7 percent compared with May 2008. That marked the largest year-over-year decline for Rockford.
Stillman Valley, Polo and Oregon posted declines of more than 20 percent, Mount Morris’s revenue was off 36 percent, and South Beloit’s was down a drastic 41 percent.
The government’s stimulus spending and consumers buying necessities might boost the engine’s overall output to 60 percent. But to me, that’s not recovery. It’s more of a refurbishment.
Without those three factors added to the equation, I don’t see a recovery anytime soon.
And given how unpredictable they are, I don’t see how anyone else can, either.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
August 1st, 2009
Glimmers of economic hope have been dawning on the horizon, and they’ve prompted a flurry of news reports containing such words as “recovery,” “bottom,” “rebound” and “optimistic.”
Unquestionably, they’re a relief after nearly two years of unrelenting reports containing “plunged,” “plummeted,” “sales” and “stock market,” or “skyrocket,” “soar,” “unemployment” and “oil prices.”
Still, there are two important things to keep in mind when reading these reports:
1. Watch the clock.
2. They really don’t matter.
At least, as far as you and I are concerned.
If all politics is local, then the economy is more so. And such an elusive concept as economic recovery will only be recognized when we can actually see it — when the rising number of unemployed people in Winnebago and Boone counties head back to work, when the restaurants and retailers on East State Street or Illinois 251 are bustling again, when neighbors move in next door.
The word that must be included in those stories, of course, is “sustained.” And lately, it isn’t.
That’s why I remain bearish, despite the reports that retailers had stronger-than-expected sales gains in the late spring and early summer or that home sales saw a good month or two around the same time. Certainly it’s cheering news. But it’s also why watching the clock is important, for any number of reasons.
The time of year is a big factor, of course, because home and retail sales, even unemployment, tend to record improvements when the weather gets warmer: Consumers get out more, and companies take on seasonal workers.
Even more important, however, is that a month or two of increases does not signal any sort of recovery after such a prolonged contraction. It doesn’t even mean that the market has hit “a bottom.” It just means long-suffering retailers and Realtors may have seen a little — in some cases very little — relief.
Consider: Homebuilders in Belvidere and unincorporated Boone County saw the number of residential building permits grow 100 percent — 100 percent! — in June over the previous five months.
The number of building permits filed from January through May? Zero. The number in June? One.
Then again, it also was the first month that the number of building permits filed in Winnebago and Boone counties didn’t drop year over year.
Any signs of growth are hopeful. Just don’t fall into the trap of listening to economists who already insist that the economy is recovering.
In other words, we’ll know when the recession has ended. And it has nothing to do with the official “end” — remember, it was about this time last year that we learned we were actually in a recession, although most of us knew it well before any announcement was made.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
July 11th, 2009
We are dauntless, it seems, in our quest to find and conquer our bogeymen.
You know him well, probably. He exists in many forms — the debt collector, the unethical coworker, the former spouse.
Of course, as the recession has unfolded around us, his various forms have started to look a lot alike: Wall Street financiers, American International Group executives, commodities traders, bankers, stock traders, short sellers, politicians … you get the idea.
It’s a fundamental human reaction, to be sure, this need to blame somebody for our woes. It allows us to identify the cause of the problem. By assigning it to one individual or group, we are reassured that the offending behavior has thus been labeled, isolated and, hopefully, imprisoned.
It doesn’t mean we’re right, of course. It just means we’ve identified the most convenient scapegoat for our troubles and can now move on, satisfied that the behavior won’t be renewed.
If nothing else, it gives us a sense of control after a global economic meltdown.
The latest bloodsucker to capture the attention of Capitol Hill is the ever unpopular Oil Speculator, with new rules proposed by the Commodity Futures Trading Commission to limit the volume of trades on energy futures by any one trader.
Politicians couldn’t find a better scapegoat — nameless, faceless and dedicated to destroying the American lifestyle. Even better, most people don’t have any idea what these guys do, anyway.
In my more cynical moments, I often wonder whether the politicians do.
At any rate, these particular bogeymen are before us for the second time as the cause of some, if not all, of our fiscal pain.
North Dakota Democratic Sen. Byron Dorgan summed up the populist tripe, saying the proposed rules would help thwart such speculators, who are no doubt “looking for a quick buck at the expense of American consumers.”
He probably said something similar last year, when gas prices jumped to $4 a gallon and politicians demanded justice from the evil Speculators. That is, until gas prices fell and Capitol Hill abandoned the bogeyman du jour to hunt for another one.
It’s coming up again because of the volatility in the oil market. Oil prices fell below $59 a barrel Friday after a steady rise the week before, when it reached a peak of $73. It’s been bouncing around most of the year and has nearly doubled from its low in the first quarter.
Certainly, speculating on energy markets no doubt has some effect on prices.
But the real problem, once again, is simple economics.
Oil prices fell last week on reports of the rise in jobless claims and the drop in consumer spending in the U.S. That means Americans, who use at least a quarter of the world’s oil production, likely aren’t going to be driving or flying much.
In other words, demand in the U.S. fell. And so did demand in those emerging markets — which will drive most of the world’s production in the next decade or two — we hear so much about: China, India, Brazil.
If you want to know when we’ll see $4-a-gallon gas again — and we will — keep an eye on those foreign economies and earnings reports from construction material and equipment companies. That’s when speculators will get involved, betting that the demand for construction in emerging markets will be followed by the demand for oil.
No satisfaction, then, in the rise. Unless we should blame another country for aspiring to the standards the U.S. has set.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
