The journey to economic recovery has begun, but the trip will be a slow, difficult slog.
That is the prediction of Mike Walden, a North Carolina State University economist. Walden, a William Neal Reynolds Professor in the College of Agriculture and Life Sciences at North Carolina State, produces an economic outlook twice a year. In his North Carolina Economic Outlook Summer 2010, Walden points out that most economic indicators are up since 2009.
“Employment, retail sales, home sales, wage and salary income and even state tax revenues have all registered gains in the last six to nine months,” Walden writes. That’s the good news.
The no-so-good news is that the economic indicators “are still well below pre-recessionary levels,” according to Walden. The economist sees the economy continuing to recover but at “a slow, agonizing pace.”
Consumers are at the root of the slow recovery, Walden says, explaining that consumers are paying down debt, saving more and spending less.
That’s important because consumers account for 70 percent of the nation’s economic activity. Walden says most economists see this consumer frugality continuing for a year or two, and until consumers open their pocketbooks wider, the economy won’t take off.
Walden sees North Carolina’s unemployment rate declining gradually through the remainder of 2010 and falling below 10 percent by the end of the year. The slow decline will continue in 2011, he predicts, while the state will add 70,000 to 80,000 jobs over the two-year period.
While the declining unemployment rate and increase in number of jobs are welcome, the state has a long way to go to reach the 4.5 percent unemployment rate of 2007 and replace the 250,000 jobs lost during the recession.
Walden predicts the jobless rate will remain “uncomfortably high as households control spending and rebalance their financial sheets.”
Walden’s North Carolina Economic Outlook Summer 2010 is available in its entirety online at http://www.ag-econ.ncsu.edu/faculty/walden/publications/outlooknc/ncoutlooksummer10.pdf.