'Sustainable' growth in economy, jobs forecast for Raleigh area
Posted January 4, 2012
Raleigh, N.C. — The Raleigh metro area economy should see an improvement in employment and economic growth in 2012, but the recovery from the 2007-08 recession will not be as robust as from most recent recessions.
So said a top economist at Wells Fargo Securities and a representative of the Federal Reserve Bank of Richmond at a forum hosted by the Greater Raleigh Chamber of Commerce on Wednesday morning.
A crowd of several hundred business leaders turned out on a very cold morning to hear details about the expectations of John Silvia from Wells Fargo and Matthew Martin, a Federal Reserve regional executive based in Charlotte. Their conclusions were along the same somber growth expectations predicted at another economic forecast event on Tuesday that was put on by the North Carolina Bankers Association and the North Carolina Chamber.
“This has been a long struggle for us,” Silvia, who is a regular at the Chamber event, said of the recovery. While he believes there will be “sustainable” economic and job growth, he added it “probably not” will be as strong as previous recoveries. He believes growth will be about 2 percent for this year.
A year ago, economists predicted 3.1 percent in growth this year and 3.2 percent in 2012. Statistics for the fourth quarter of 2011 are not yet available, but overall growth is expected to be around 2 percent.
On the same day that North Carolina reported a drop in the Triangle unemployment rate had dropped to less than 8 percent in November, Silvia noted the Raleigh area added jobs at 1.8 percent rate of growth that month.
“You are creating jobs,” he said. He described the growth as “sustainable” even though state and local governments will continue to be under financial pressure.
While Raleigh’s jobless rate is “not great,” he noted it is “under the national average” of 8.6 percent. He also pointed out that Raleigh leads the state in jobs and economic growth.
“You are dealing with the best hand in the state,” he told the crowd.
Bob Geolas, president and chief executive of the foundation that operates Research Triangle Park, said after the forum that the business park is developing a new master plan to maintain its hot hand.
"We're going to do that by expanding the opportunities for entrepreneurial start-ups, by expanding opportunities for new corporate ventures," Geolas said. "We have to make the park a viable, attractive alternative for (the next generation of) companies, and we will."
RTP's existing model is built on recruiting large companies for large campuses in the park, but Geolas said the remaining 700 undeveloped acres in the park will be handled differently.
"We are going to have cluster development within the park that brings together facilities in a more urban, dense type of way with a great many more facilities and amenities than you see at the park today," he said. "(RTP) has played a role – a transformational role – in North Carolina. It's going to continue to do that, and we're excited about its future."
Silvia stressed several points of strength in the Raleigh economy, such as a wide diversification of jobs – government and professional services at 18 percent, trade, transportation and utilities at 17 percent to lead the way – and the region’s universities.
While government jobs have declined in number, he noted that “very well-paid sectors” such as professional and business services and education and health services are producing more jobs at a rate higher than 4 percent.
The housing market also is reason for optimism, Silvia noted. Home prices “are approaching a bottom.” While some home owners are “under water” with mortgages higher than house values, Silvia noted that Raleigh had evaded the housing boom of the mid-2000 decade. Thus Raleigh has avoided “a real downdraft” in prices.
On the commercial real estate front, Silvia stressed: “We’ve turned the corner.” Office vacancy rates have declined from close to 17 percent in 2010 to well under 16 percent. Apartment vacancy rates, meanwhile, have fallen sharply over the past two years to under 10 percent from well over 12 percent.
In his presentation, Martin offered little hope for job seekers. He noted that payroll employment across the Carolinas lags well under recovery rates from recessions in 1975, 1982 and 1991. Job growth is slightly better than that shown after the 2001 downturn, he said.
In an analysis of core capital goods spending by companies, Martin pointed out there is growth that has neared the peak of early 2008. Shipments also have recovered well.
However, that performance is not translating into jobs. Companies are “not hiring,” he said.
One good point for North Carolina is continuing growth of U.S. exports. Martin noted that the value and volume of exports from Carolina ports is “surging.”
Both men also expected inflation to moderate.