Limited optimism in 2012 economic forecast
Posted January 3, 2012
Durham, N.C. — Despite Gov. Beverly Perdue's call for optimism in 2012, an economist and a venture capitalist both said Tuesday that North Carolina and the nation face obstacles to growth in the coming year.
Speaking at an annual economic forum sponsored by the North Carolina Bankers Association and the North Carolina Chamber, Appalachian State University economics professor Harry Davis predicted the economy would grow at 2.25 to 2.5 percent in 2012.
Although that's better than the 1.75 percent growth in 2011, Davis said, it's about half of the annual growth rate the U.S. has seen in recent decades.
"Everything is moving in the right direction. It's just moving slower than we're used to," he told hundreds of people gathered at the Sheraton Imperial Hotel.
Perdue told the crowd that optimism was her focus for 2012, calling North Carolina "the state where big ideas turn into reality."
"For the first time since I've been governor, I'm hopeful," she said.
Davis was less hopeful, noting that the home construction industry remains in the doldrums. In previous economic recoveries, the residential housing industry grew by 26 percent, he said, but it's seeing only 6 percent growth now.
"The one engine that's always been there is simply not working," he said.
Other problems include a weak financial sector, sluggish consumer spending as families look to pay down household debt and persistent unemployment, he said.
Following a recession in the early 1980s, the U.S. created 3 million jobs in 12 months, Davis said, adding that it has taken the nation 30 months to reach that same milestone following the most recent recession.
"A lot of the unemployment we have is going to persist for quite some time," he said. "People do not have the right job skills for match up with (available) jobs."
He predicted North Carolina's unemployment rate would drop from 10 percent to 9.3 percent by the end of 2012 but would remain far above the national rate, which he said would be about 8 percent.
Bob Ingram, a former chief executive of GlaxoSmithKline who now is general partner at Hatteras Venture Partners, said he would like to follow Perdue's call for optimism but said people need to be realistic.
The economy faces headwinds, Ingram said, in the form of demographics, deficits, debt and demagoguery.
An aging population, deficits in the U.S. budget and foreign trade accounts and political gridlock in Washington, D.C., that makes it difficult for businesses to forecast all present obstacles to growth, he said.
"Politicians are posturing on both sides for advantage in the next election," he said. "It's at the expense, frankly, of the welfare of our country."