From the Charlotte Observer
The Charlotte region ended 2010 in a state of transition, stuck in an economic recovery that didn’t feel like one, and in many ways, this year will deliver more of the same, economists say.
But they say 2011 looks stronger than last year, and that more companies and consumers are taking note.
“While we’ve still got a lot of climbing left to do, there are more and more people who have begun that climb,” said Rick Kaglic, an economist at the Federal Reserve in Charlotte. “It’s a modest increase, but it’s broad-based, and that’s kind of the encouraging thing about it.”
Local indicators from unemployment to home sales to commercial building permits point to a rebound early this year, after a stretch of setbacks in the second half of 2010. Home sales, for instance, rose 18 percent in January over the previous year, and foreclosures fell that month by nearly a third.
Other measures suggest lingering trouble: Residential building permits dipped 40 percent in January, and bankruptcy filings rose. Unemployment, though it continues to fall from its peak in early 2010, remains well above prerecession levels, and experts worry the slower-than-expected pace of job creation could hinder the recovery for years to come.
Kaglic and two other economists weighed in last week on the latest economic data from Mecklenburg County – and what it means for the year ahead.
Rick Kaglic, Federal Reserve economist
Kaglic saw promising signs in the latest indicators, from home sales to local sales tax collections, which climbed 12 percent in January over January 2010. But there’s still a lot of damage that needs to be undone, he said.
“It’s a familiar story: We’re moving in the right direction,” he said.
Last year was like a roller coaster, with the economy growing in fits and starts, due in part to government stimulus, Kaglic said. Looking forward, he expects the recovery to progress a little more evenly.
Employers have reported in recent business surveys more output and demand, and more firms are gaining the confidence to hire again, Kaglic said. That likely means a gradual improvement in the Charlotte area’s unemployment rate in 2011, especially in the second half of the year, he said.
Because of the “huge hole to fill in the job market,” though, that growth won’t be all that gratifying. It could take several years to achieve a sense of normalcy regarding the local unemployment rate.
Despite the continued challenges, the local data are encouraging and mirror what’s going on nationally, suggesting a better year ahead, Kaglic said.
“We’ve got more tailwinds and fewer headwinds heading into the second quarter of 2011 than the second quarter of 2010,” he said.
Mark Vitner, Wells Fargo economist
There’s some good news in the local economy, but also enough bad news to mean the recovery will remain painfully slow, Vitner said.
“It’s not a fast enough pace so people without jobs can readily find a comparable job,” he said. “… That makes it tougher for home sales and retail sales to bounce back all that rapidly.”
The data paint a complicated picture: Sales tax climbed, for instance, but that was only after falling the year before. Foreclosures fell in January from January 2010, but Vitner has heard anecdotally that foreclosure activity has since increased.
Overall, “it seems like there’s a little less bad news and a little more good news,” he said. “Things that were weakening don’t seem to be any weaker.”
The job market remains difficult, and even employers who initially planned to hire workers this year might back down, due to rising health care and unemployment insurance costs, which have made it more expensive to hire new employees, Vitner said. Employers are also uneasy about the uncertainty in the economy, from government debt to the effect of natural disasters, he said.
Vitner expects stronger job growth in 2011, particularly in finance, commercial real estate, leisure and retail. But he said it could take until the middle of the decade or longer to replace the more than 74,000 jobs the Charlotte region lost during the recession and to return to the sub-5 percent unemployment levels the area routinely experienced before the recession.
“We have a long way to go,” he said. “As an economist, you tell people the economy is getting better, but that doesn’t help people who can’t find work.”
John Connaughton, UNC Charlotte economist
Connaughton was more optimistic, saying the Charlotte-area economy has turned a corner.
The number of unemployed workers has fallen, and jobs are slowly returning. Although lagging indicators such as falling residential building permits and still-troubling foreclosure rates continue to pose a problem, 2011 will bring more job opportunities and more confident consumers, he said.
That means people will be more likely to spend – and economists won’t be called on as much to speculate on the region’s outlook, a sure sign of improvement, Connaughton said.
“By summer or next fall, you guys will stop calling me,” he said. “You won’t be seeing economy stories every night on the local news. That’s the difference.”
Connaughton expects the most job growth in the business and professional services, finance and health sectors, while jobs will remain scarce in manufacturing and construction. He said the N.C. unemployment rate is likely to fall to 9.5 percent by the end of the year, and while that’s still well above prerecession levels, the drop will feel significant compared with years past.
Connaughton said it could take four years for the state to gain back the jobs it lost during the downturn. But for many local workers and businesses, the recovery will be well on its way before that.
“If everything kind of stays in line with where we think it is, 2012 will really feel like a go-go year,” he said.
