Economist: Base helps Wayne weather recession
By Steve Herring
Published in News on July 16, 2010 1:46 PM
Michael Walden
The Goldsboro area clearly suffered during the recent recession, but the presence of Seymour Johnson Air Force Base helped to blunt the pain somewhat, says one of the state's chief economists.
Dr. Michael Walden, a William Neal Reynolds professor and North Carolina Cooperative Extension economist in the Department of Agriculture and Resource Economics of North Carolina University's College of Agriculture and Life Sciences, spoke at the annual Wayne County Development Alliance's Industry Leaders Luncheon at Lane Tree Golf Club.
Unlike the last time Walden spoke to the group, two years ago, this time he brought better news -- of an economy that is emerging from a deep recession that has claimed thousands of jobs and devastated the housing market.
However, he cautioned that it will be years before the economy rebounds to its pre-recession levels.
"You actually had a very interesting couple of years," Walden said. "First of all, you did lose jobs. At the worst, you lost about 6 percent of your jobs up to December 2009. Since then, you have regained some back. You are up to losing a little less than 5 percent. You actually gained jobs in the last six months in the Goldsboro Metropolitan Area. Again, just like North Carolina, like the nation, you are not back to where you were, but you are heading in the right direction.
"The other thing I want to show you, which is very significant, is that you had a much significantly lower unemployment rate than the state."
Before the recession the Wayne area's unemployment rate was hovering at just over 4 percent, compared to 4.5 percent for the state, he said.
"My point is you are under the state average and I think the big reason why, and you see this in Fayetteville, you are reaping the benefits of the military here. With Seymour Johnson Air Force Base, at least during this recession, the military and federal military expenses have really been immune to the recession.
"If you look at Fayetteville, it actually lost no jobs during the recession, none whatsoever. You have not been as lucky, but you have done better than the state so the message here ... is the military is very important and has benefited you quite well during this recession."
Walden said the recession was starting in 2007 and lasted through the middle of 2009.
"When I spoke to you the last time, it was very trying economic times," he said. "I can report to you today the economy is better today. We are clearly now back from the edge but we are not back to where we were before."
Walden said that when economists say the recession is over, "all we mean is the economy is beginning to improve."
It does not mean things are back to the way they were, he said.
North Carolina's economy has fared better than the nation's, but it is not a part by itself, it is closely tied to the national and international economy, he said.
"In terms of North Carolina, I would argue, as I look at the numbers, that we are very well positioned to compete with other states and in fact to compete worldwide," Walden said. "We have a lot we have we can crow about in North Carolina.
"I think we will outperform the nation, but again that does not mean that four and a half unemployment is around the corner. It means it still is going to come down very slowly here, but I still think it is going to come down faster than it will with the rest of the nation."
Walden compared the federal stimulus package to putting out an "economic house fire."
It is like someone who lives in a rural area and comes home to find their house on fire, he said. There is no nearby fire department so the person races from neighbor to neighbor to ask for help.
In exchange for the help, the homeowner signs an IOU for each neighbor who helps. The person goes into debt, but the house is saved. However, the homeowner now has to worry about finding a way to pay the IOUs, he said.
"That is sort of what we have gone through for the last two and a half years," he said. "You can argue that our economic house was on fire and we have to do whatever we think will work and put that fire out.
"Now we are beginning to worry that it looks like the economy has stabilized. Now we have to worry paying off those IOUs. What we are going to hear more and more about, I think, over the next year or two is how does the federal government begin to withdraw some of that stimulus in order to prevent some of the bad things (inflation) from happening."
Money will either have to be shifted from somewhere -- either the budget "or out of your pockets and my pockets" to pay the interest charges for the stimulus, he said.
Using more money to pay off the debt means less money to invest in education, technology, whatever, he said.
"Therefore you grow more slowly," he said. "The debt kind of weighs down on our growth rate."
He told the audience not to expect a "double-dip" recession that occurs when the economy recovers after a recession, only to fall into another one. However, the nation can expect the recovery to remain slow, he said. It will be years before the economy will be in the position that it was before the crash, he said.
Household debt reduction is a key to the recovery, he said.
The faster household debt is brought under control, the more money saved then the quicker people will see the economic recovery speed up, Walden said.
"Things are looking better, so leave with a smile on your face, but be realistic," he said.