Federal Reserve official: Economy still weak
By Emily Ford
CONCORD ó The recession has ended, but recovery from near financial ruin will take more time, an economist told business leaders during the State of the Region Summit.
“I have no illusions that the economy is strong by any stretch of the imagination,” said Richard Kaglic, a regional economist at the Federal Reserve Bank of Richmond serving the Carolinas.
Kaglic, who works in Charlotte, called the recovery “weak” and “fragile.”
The Cabarrus Regional Chamber hosted the summit, an annual event held the week following fall elections. Leaders from Cabarrus and Rowan counties gathered in a movie theater at Concord Mills to hear analysis of the region’s economic development and public policy.
Kaglic delivered mixed news.
While financial markets have shown considerable improvement and some key segments of the economy have stabilized, manufacturing still lingers at the lowest level in a decade and layoffs continue, he said.
“Jobs,” he said. “We are still losing them.”
Nearly 100 employees at longtime Salisbury manufacturer W.A. Brown lost their jobs this week when the company announced it would close.
Since the recession started in December 2007, 7 million jobs have been lost, Kaglic said. And the unemployment rate will continue to rise.
North and South Carolina fared worse than other states during the downturn because of a high concentration in manufacturing and construction, Kaglic said, “two industries that have been ravaged during the recession.”
North Carolina’s economy has a lower concentration than the national average in the only sector that grew during the recession ó education and health-care services.
The housing market has finally hit the bottom, but only after considerable damage, Kaglic said. Home prices have fallen 30 percent across the nation.
With expanded tax credits for home buyers, the housing market will grow in the beginning of 2010, Kaglic predicted.
Commercial real estate and nonresidential construction will be weak for some time, he said.
Several construction projects at the N.C. Research Campus in Kannapolis, which was lauded by officials during the summit, have been on hold since the economy tanked.
As the country recovers from recession, Kaglic said the “climb out of the trough” will take a low trajectory because consumers are constrained by rising joblessness.
Look for production to pick up, banks to start lending again and, eventually, firms to stop firing and start hiring, he said.
The recession would have been much worse if the government had not intervened, Kaglic said.
The intervention staved off global disaster, he said.
The federal stimulus prevented financial panic, which could have prolonged the recession for five more years, he said.
“The fact that we are actually seeing growth after less than a year is pretty impressive,” Kaglic said.
The government stimulus did not create an artificial recovery and saved important industries such as auto manufacturing, he said.
But once the economy “can breathe on its own, it’s important to pull back on stimulus as aggressively as we added it,” Kaglic said.
Manufacturing will come back more quickly than other industries, reaching 2005-06 levels by 2013.
Housing will take “quite some time,” and retail will recover last in five to six years, he said.
Dr. Carol Spalding, president of Rowan-Cabarrus Community College, asked Kaglic what advice he would give job seekers.
His answer must have been music to Spalding’s ears.
“Don’t be afraid to take on additional training and learn new skills,” he said.
He urged discouraged or underemployed workers to stay flexible and warned that if “you’re not learning anything, you should probably be very afraid.”