N.C. will make ‘modest’ rebound in 2009, economist says
Posted December 9, 2008
CHARLOTTE, N.C. — North Carolina’s economy will not begin to grow out of the current recession until the second quarter of 2009, according to UNC-Charlotte economist John Connnaughton.
By the time the economic downturn ends, it will be the longest in 26 years, Connaughton wrote. And even when the recovery occurs he noted it would be “modest.”
He identified one “bright spot” in the report.
“The only bright spot is the decline in oil prices and the impact that might have by putting cash back into consumers’ pockets to fuel a rebound in 2009,” Connaughton wrote.
But overall his report was grim.
“The expectation is that the North Carolina economy should begin a modest recovery during the second quarter of 2009,” Connaughton said in his quarterly economic report, which was issued Tuesday. He has published reviews since 1982.
“The recession, which began in January of 2008, is expected to last at least five quarters,” he added. “This would make the 2008 recession the longest recession since the 1982 recession, which lasted 16 months. The two most recent recessions were quite short; both the 1991 and 2001 recessions lasted only eight months each. We are already in the 12th month of this recession.”
Connaughton believes that for 2008 the state’s economy will shrink for the first time since 2001.
Even a meager recovery is not guaranteed, Connaughton warned.
“The outlook for a recovery during the second quarter of 2009 is based on two critical factors taking place,” Connaughton said. “First, the credit markets, which froze on Sept. 17, 2008 must begin to operate, and money lending must take place. The Fed has been successful in securing the financial industry from failure but has not been able to free-up lending.
“Second, the incoming administration must provide a fiscal stimulus package in excess of $500 billion to create jobs and stem the downward spiral in job losses that has plagued the economy since January 2008.”
Despite some growth, North Carolina’s economy will continue to shed jobs, Connnaughton added. The state’s unemployment rate hit 7 percent in October, and he predicted that overall more than 50,000 jobs would be lost for 2008.
Connaughton’s analysis led him to forecast a decline in seven of 10 non-agricultural sectors, with mining (17.9 percent), finance, insurance and real estate (6.9 percent) and non-durable goods manufacturing (5.4 percent) to be hardest hit.
According to Connaughton, the recession is “is a direct result of the mortgage meltdown and the dent put into consumer pocketbooks by high gasoline prices during the first three quarters of the year.”
By the end of 2008, Connaughton predicted that eight of the 11 economic sectors in the state would decline:
• Agriculture, -11.0 percent
• Construction, -8.0 percent
• Mining, -6.1 percent
• Durable goods manufacturing, -3.2 percent
• Retail trade, -2.1 percent
• Finance, insurance and real estate, -1.8 percent
• Wholesale trade, -1.5 percent
• Nondurable goods manufacturing, -1.0 percent
Only services, government, and transportation, warehousing, utilities and information will show growth, he added.