Monday, January 31, 2011

Charlotte's economy shows "a lagging city"

I'm live-blogging (and tweeting – and Tweeting, follow me @marynewsom) from the Charlotte City Council's yearly retreat. We're about to hear from three economist-types about the 2011-12 economic outlook.

Council members were 45 minutes late for this session, as they all went out to West Charlotte for the Project LIFT announcement.

12:09 p.m. - Wells vice president and economist Anika Khan predicts Charlotte won't recover the jobs we lost until 2014-15. Says unemployment won't get as low as 8 percent until 2012. She calls Charlotte "a lagging city."

12:15 p.m. Anika Khan says the local apartment market "starting to take off." "We have still a way to go with the Charlotte office market." Said retail still has an 11.3 percent vacancy rate.
She concludes, "Charlotte is positioned for growth. But it's going to be slow and very modest."

12:17 p.m. John Connaughton, UNC Charlotte econ prof and director of the UNCC Economic Forecast, opens by saying, "I'm far less optimistic." He points out that North Carolina lost 283,000 jobs since recession started. Last year, he said, NC added only 10,000 jobs. That leaves 273,000 to go. "You can do the math," he says, about how long it'll take to make up the jobs at that rate.

12:25 p.m. Connaughton predicts it will be 5-6 years before Charlotte gets back to the same level of employment the city had at the peak in December 2007. Many of the jobs lost are blue-collar jobs that aren't coming back, he said.
Also, there's a "new normal" and people aren't buying as much. Since 71 percent of the U.S. economy is personal consumption, he said, that means slower growth.
And "consumers are just not happy campers" he said. "Consumer confidence has been hammered." Consumers don't see job numbers that make them comfortable.

12:35 p.m. - Connaughton now talking about risk of double dip recession if oil prices go up much higher. For every 50 cents that gas prices go up, he says, it takes $150 billion out of U.S consumer pockets. He used to think the double-dip recession wasn't likely. Now he's not so sure.
He noted the huge cash reserves that banks are holding. "There's plenty of cash out there. It's just not getting into the hands of small businesses," he says. That's one thing that's a real killer," he said.

Connaughton also pointed out the need for North Carolina to restructure its tax policies. Property tax revenue will rise, but slowly, he said. But the state depends too heavily on the sales tax, which (see "new normal," above) is becoming a smaller and smaller share of economic growth.

12:50 p.m. - Matt Martin, senior vice president of the Federal Reserve in Richmond, is less pessimistic than Connaughton.
He says the construction jobs we saw at the peak aren't coming back. It was 6 percent of U.S. GDP at the peak, he said, which was high for historic norms. Now it's less than 3 percent.
And the lost manufacturing jobs won't come back, either, he said.