By Jefferson George – firstname.lastname@example.org
Originally Posted: Wednesday, Dec. 03, 2008
Experts: No quick relief for economy
Recession will likely ‘get worse before it gets better,' Fed official tells a local forum.
Now that the U.S. is officially in a yearlong recession, don't expect relief for several months, local experts on the economy and finance said Tuesday.
Jeff Kane, the top Federal Reserve Bank official in Charlotte, and Wachovia chief economist John Silvia told about 50 businesspeople that the recession will stretch into the second half of 2009, and that key economic indicators – most notably unemployment – will continue to deteriorate in the next few months.
“I would expect it to get worse before it gets better,” Kane said.
Silvia agreed, saying he expects Friday's release of national unemployment data for November to be “nothing short of horrendous.”
Silvia didn't predict how high the Charlotte area's jobless rate would climb but said U.S. unemployment could reach 9 percent. This year, the Charlotte region has consistently had a higher jobless rate than the nation, including 7.1 percent versus the U.S. rate of 6.5 percent in October.
Kane and Silvia spoke at an economic forum held in the SouthPark area by the Family Business Center, part of Wake Forest University's Babcock Graduate School of Management. The center provides advice and assistance to closely held and family firms.
Although economic officials said Monday the recession started last December, Kane said some indicators – namely home sales and retail sales – started falling in 2005. That's not surprising given the nature of normal economic cycles, he said, and the fact that home values had been surging.
Any appreciation beyond 5 percent or 6 percent often suggests a bubble, Kane said. “Once you get outside of that,” he said, “you know it's going to revert.”
One potential positive in slumping real estate values and retail sales is the weeding out of competition, with some companies able to snatch up land or leases at bargain prices.
“If you've got deep pockets,” Silvia said, “you can find out who the weak sisters are.”
Such opportunities could extend into the spring, when Kane said most economic indicators should bottom out. He pegged September as an end date for the downturn, and Silvia also said recovery could start by the end of summer.
Until then, he said, “we're just going to have to deal with six months of lousiness.”