(Updated with new unemployment figures)
Earlier this week, we brought you the optimistic outlook of UNC Charlotte economist John Connaughton, who not only believes the worst of the recession is behind us, but that Charlotte may emerge as strong, if not stronger, than before.
Today, a gloomier portrait.
North Carolina State economist Michael Walden sees our city heading toward a stretch of difficulty, one that includes double-digit employment rising to the low teens - 13 or 14 percent. Unemployment for the Charlotte/Concord/Gastonia region in January: 10.5 percent. (Updated: According to new numbers out this morning, that rate jumped to 11.7 percent in February.)
"Charlotte is being hurt by having substantial employment in two sectors that are suffering - financial services and vehicle parts," he says.
Those industries will continue to feel strain, Walden believes. Most business leaders here expect substantial job losses ahead in the banks.
While Connaughton sees a financial industry that soon will concentrate power in just a handful of firms - most notably, for us, Bank of America and Wells Fargo - Walden says it's too early to forecast a landscape that's beneficial to Charlotte.
"I think we're just on the cusp of a reorganization," he says. "I don't think we know what the industry will look like."
Walden is ultimately bullish on Charlotte's outlook - "Costs, location and civic activism are key assets," he says - but he thinks the 4 percent-ish growth we experienced in the 1990s is out of reach for us now. Cut that in half, he says, and figure we'll be flourishing again at the middle to end of next decade.
As for the near future, no. When will we hit the low teens in unemployment? "A year from now," he says.
That sounds like a hard road ahead.
"Yes."
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Squeeze readers: Are you heading to Detroit this weekend to see the Tar Heels in the Final Four? Would you go in other years but are staying home for financial reasons? Call me at 704-358-5029 or contact me at pstonge@charlotteobserver.com.
Wednesday, April 1, 2009
A gloomier future for Charlotte?
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31 comments:
you people living in Charlotte need to be careful! Saying negative things can get you tainted for life.... be very careful..
I tend to agree with anonymous! 8:38am. If we keep forecasting and thinking negative thoughts about our future, that's what will happen. It's a self fulfilling prophecy. Let's all crawl out from under our rocks and go back to life as usual. The world is still spinning around out there...
Seriously, what is the point of writing this? What is the the point of saying "what if"? None of these economists knows what they are are talking about. Nobody has a crystal ball and can see into the future. These articles do nothing but SCARE people and make the situation worse than it is.
John Connaughton never sees anything out there but rosy scenarios. I would take his opinions with a grain of salt...
I think John should just focus on UNC Raleigh :) and leave our city forecast to our University...
Hey Louie are you crazy or just simple minded? Saying "negative"things is hardly the cause of this depression. You remind me of the "Cowardly Lion" in the movie Wizard of Oz.
The banking system is bankrupt a thousand times over. The Charlotte economy was "always" built on "hot air". It took the pin prick to deflate it.
There is no bottom to this collapse. The only solution is to place the banking system into bankruptcy and write off all those trillions of dollars in fraudulent derivatives contracts.
Then issue credit to rebuild a broken US economy. But no more money goes to creating "paper tigers".
So we MIGHT see slower growth in the next few years but does that mean we are going to fall off the face of the earth? NO. If you look at the past at cities like Dallas and Houston, they were able to rebound and are now growing more than ever. I think most people know the type of growth we had in the last few years, although exciting, is not sustainable long-term. That doesn't mean it won't happen again though. All of this contradicting news (good and then bad and then good and then bad) proves that nobody knows what they are talking about. What I know is that Charlotte has a low cost of doing business and living compared to most places, a mild climate, a good location, a major airport, a large and talented workforce, and it is a place where people want to be. Those are all good things that will benefit this city in the long-run.
The state economist is right about the fact that two key Charlotte-area industries are suffering the most. But he is wrong about the result. He may not want to admit what the reorganization of the financial industry will look like but there aren't that many options given what we do know. The federal government is working to restore the financial sector and avoid huge layoffs, that is clear. If it succeeds, Charlotte will prosper. It is also working to salvage the auto industry so if our parts industry can adapt to the changes fast enough it may even emerge stronger than before. We have a lot of things going for us including our medical industry, new constuction and infrastructure, our large pool of skilled labor and strong work ethic (and uncle Sam). My bet is we'll do a heck of a lot better than what the state economist predicts. Afterall, doesn't he want to convince us that his job is important?
While some of you are partially right about industires rebounding and such and there much of this becomes a self fulfilling prophesy, you ignore one larger element. The change in Charlotte's demograhics the last 10 years has been huge. It is primarily a population which is dependent on the government. It is unable to perform even manual labor. They are above that and is the cause for many of the illegals in this area now. There is no light manufacturing industry in this area to support this "undereducated" class as was in the past so now they have learned to live off of the government and charities.
Who are u more likely to believe?, an NC State economist who lives in Raleigh or a UNCC economist who actually lives in the city in question and actually knows what he is talking about. Truth is, nobody really knows what is going to happen, but its better to do something rather than nothing, the study of economics in and of itself is relatively new, about 100years, we will learn from this as we have in the past. Study your history. Doing nothing should not be an option at this point.
To Anonymous @ 9:33, I'm probably more educated of the recession than you are, given the organization I work for here in Charlotte (no, it's not BofA or Wells/Wachovia). Yes, toxic loans and other factors are what started this recession, but what's keeping us treading water at this point is consumer confidence. All people are hearing night at day through the media is how bad things are; so people are holing up and stocking up for doomsday. If Americans would simply pick themselves up, dust themselves off, and go back to life as usual, we'd see a MUCH quicker turnaround. When money is spent, jobs are created, period.
For what it's worth, the financial system has ALWAYS been about citizens confidence in our banking system and government. Our monetary system is almost wholly not backed by gold or any other commodity. So we're always at risk for recessions and implosions. The only thing that keeps the engine going is people spending money, and keeping everything moving and lubricated. Otherwise it seizes and collapses. In the end, this recession is nothing more than a market correction. People were taking on more debt than they could sustain via Adjustable Rate Mortgages and such, and the pendulum finally swang back and got us. This recession is absolutely something we can recover from, we just have to find a way to live more sustainably, and get back to business! :-)
Louie, "you're probably more educated about this recession because of your employer? Give me a break.
Wachovia, BofA and all these paper tigers are BANKRUPT!
If you were so in the "know" then how is it you are unaware of the over $50 trillion in derivatives debt sitting in the "off balance" sheet accounts of Bank of America?
That $50 trillion in debt makes them "defacto" bankrupt. To try and keep them in business under these conditions in tantamount to "treason".
For claiming to be an "insider" with special "knowledge" you sure do write like all the other idiots.
You don't know what you're talking about. This isnt a recession or even a depression. This is the collapse of the post Bretton Woods monetary and financial system.
Either the President declares the system bankrupt or you'll have a collapse into madness the likes of which havent been seen since the 14th Century "Dark Age" in Europe.
Anon @ 10:23 - the supurfluous quotation marks, use of "paper tigers" and reference to "off balance sheet accounts" makes you sound like a crackpot.
Anonymous 10:23,
PLease posta link if you can related to the 50 trillion in off balance sheet debt. I'd like to know more about that.
Thanks.
But using the name of an actor who portrayed comic book character Batman makes you "sound"(how do you make sound with written text) like a genius?
Total Notional Value Of Derivatives Outstanding Surpasses One Quadrillion
Author: Jim Sinclair
http://www.jsmineset.com/
Dear CIGAs,
The notional value of all outstanding derivatives now totals approximately $1.144 QUADRILLION.
This appears to be Bank of International Settlement Spin to announce the largest gain in derivatives outstanding since they started to report. As of the last report it appeared that both listed and OTC derivatives was under $600 trillion. Now listed credit derivatives alone stood at $548 Trillion. The OTC derivatives are shown as $596 trillion notional value, as of December 2007. One can only imagine what number they are at now.
Well we hit a QUADRILLION. We have more than $1000 trillion dollars in all derivatives outstanding. That is simply NUTS because notional value becomes real value when either counterparty to the OTC derivative goes bankrupt. $548 trillion plus $596 trillion means $1.144 quadrillion.
It would be an interesting piece of research to see what the breakdown is of listed derivatives according to exchange to see if it adds up to the reported number. Spin is now everywhere.
This means that no OTC derivative house can be allowed to go broke. This means that whatever funds are required to rescue failing international investment banks, banks and financial entities will be provided.
Keep this economic law in mind. Monetary inflation proceeds price inflation and is its primary cause in economic history from Rome to present.
Nothing can stop the juggernaut of price inflation heading towards every nation like a runaway freight train down a mountain.
Gold is going to at least $1650. I am probably way too low with that estimate.
The US dollar will trade down to at least .5200 as measured by the USDX.
Honestly, this is what is wrong with the media these days - everything is doom and gloom, and everyone wants to be the one to say they called it.
Charlotte is light years ahead of the game compared to other cities in the world, let alone the county, and we need to remember that last one in is first one out. Some area's of the country have felt this for 4+ years already, regardless of the current financial and local economic pains we are feeling today.Everyone got caught up in the feeding frenzy, overextending, overlending, overhedging and now it is call time.
We all know the economy stinks, we all know that world markets are struggling, so opinions on the obvious are silly - the sheep will believe whatever you tell them, so stirring up everyone into a frenzy with this "sky is falling" approach is just as irresponsible as telling everyone to remain calm, that all is well. Report actual statistics, and news, not opinion.
I noticed you stop posting Laurie Reed's blog. Was it too positive for you? Seriously, I am just about done reading the Observer on line. I cancelled my printed subscription but of course it keeps being delivered every day. We should have cancelled it years ago. Who knew we could get it for free?
Anon, 11:25: We haven't stopped posting Laurie, whom we love. Glad you do, too. We're hoping for another update soon.
All this column consistently does is depress consumer confidence further. Bravo!
Whoa, someone actually quoted Jim Sinclair? What has he been doing since the 1980s? Oh yea, sticking his fingers in every loose gold market in the world while coming back to the US and talking up gold prices. All so he can make a quick buck. He thrives on commodities speculation while lecturing other people on how bad it is. Do as I say not as I do and all that. O and he was a major campaign donor for Bush/Cheney go figure. He even did a bit for Monex. That guy is part of the problem, not the solution. Wake up.
Peter you should, once again, have two columns.
One for the glass half full folks
and
One for the glass half empty folks.
Wow. If this had been about a prediction that Charlotte would be twice as big in 10 years people would be pulling out the party favors. I have never see residents of a town throw tantrums like Charlotteans when the news isn't glowing.
Folks, where mid-sized cities are concerned, Charlotte is regular. Nice, but REGULAR.
It's not just Charlotte that will be hurting for years to come, it's everybody. And it will only be worse if we continue to artificially prop up the economy with bailouts and toxic asset relief schemes. The people who got us into this mess, bankers, governments, and borrowers alike, must be allowed to fail and fail in direct proportion to their mistakes. Otherwise we'll see the exact same situation ten years down the road when some other shadowy financial instrument with no ascertainable value causes a collapse. Don't tell me to go out and spend my money and have confidence in a system that doesn't allow mistakes to be punished.
Stupidity should be painful.
I'm not promoting Jim Sinclair in fact I have never heard of him.
I was however promoting his accurate accounting of derivatives totaling almost $1.5 quadrillion.
Now any fool knows what must happen when that much speculative paper is turning each day of the calendar year.
It must collapse and it is collapsing.
Really? We don't have better things to worry about these days? How about we use this same energy and focus on the good stuff or just help create a better city. Talking or writing like this will get us NO WHERE. Time to start thinking about a brighter future - We want jobs in this city and without people getting out there and creating them, we won't have a leg to stand on. So let's pull up our boot straps and do something instead of all this complaining and whining about how this is everyone's fault - isn't it about time we change things? Enough media crap - time for the people to get out there and make a difference - and you media peeps need to shut your mouths - didn't you mama teach you? If you don't have anything nice to say - DONT SAY IT AT ALL.
I post on charlotte.com a lot and though i am a "liberal" I agree about attitude. If you keep a negative attitude it will tend to follow you. Even for a whole city like Charlotte it can effect things. Keep the upward look. Keep in mind reality as well though. The economy is a titanic ship. You can push the tiller to starboard as hard as you want but it takes a while for the ship to turn. I see 15+ % unemployment before the ship finally starts heading north again. It is not improbable at all. However, keep a positive attitude and believe that things will get better and follow it up with action and everything will be well. :)
"For what it's worth, the financial system has ALWAYS been about citizens confidence in our banking system and government. Our monetary system is almost wholly not backed by gold or any other commodity. So we're always at risk for recessions and implosions. The only thing that keeps the engine going is people spending money, and keeping everything moving and lubricated. Otherwise it seizes and collapses. In the end, this recession is nothing more than a market correction. People were taking on more debt than they could sustain via Adjustable Rate Mortgages and such, and the pendulum finally swang back and got us. This recession is absolutely something we can recover from, we just have to find a way to live more sustainably, and get back to business! :-)"
Sounds a lot like a ponzi scheme no?
As for the media and putting them down for reporting this stuff that is wanting to bury your head in the sand. Attitude matters but seeing reality for what it is is important. Typically, republicans want to ignore suffering, problems and move on with their own negative goals of massive profits at the expense of society (education, environment, disapproval of anything different then self etc). However, I stand behind the fact that a positive attitude followed by positive action will make a huge difference.
Also, what is "negative" should be seen as an opportunity to diversity Charlotte's economy. Why was it decided to base most of the economy on Finance and Auto parts to begin with? Well Biotech is one possibility though it will take a while to build that even with the new research center nearby. What other industries could be developed that build on Charlotte's strengths and location? A mentality of just "more jobs of whatever we can get" without vision is not going to provide a stable ecomony in the long term. Again, vision, attitude, and action.
Charlottes gone to hell in a handbasket like everywhere else. A good idea is to plant gardens for food or move to the coast to fish to keep from starving.
Buy a good tent for the future and stockpile can food. You will need firearms too for protection.
When you put all your eggs in one basket ...
The mother of all economic catastrophies ...
If only yellow Bush had taken up Saddam on that duel challenge in 2002. That was a win win.
Darn.
Gore should have been the real prez in 2001 ... Maybe this big mess is all a divine payback ...
Breakup of America closing in fast. Millions to die possibly. Choas and anarachy. Yikes ... Gonna be bad.
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