Economists: U.S. economy is held back by failure to reach overarching deal
01/04/2013 7:01 AM
01/04/2013 7:01 AM
Although the nation avoided a fiscal crisis this week, some economists say the failure to come up with an overarching deal that addresses federal spending and the debt ceiling continues to hold back the U.S. economy.
The business sector’s confidence remains depressed, and the No. 1 reason cited by small-business owners for their lack of optimism is “the uncertainty around fiscal policy,” said Michael Brown, an economist with Wells Fargo Securities. “In general, we’re looking for a more modest pace of business spending than what we’ve seen over the last couple of years,” Brown said. “This is the sector of the economy we need firing on all cylinders to help get that ... job growth going.”
Brown was one of the featured speakers Thursday at the annual economic forecast sponsored by the Greater Raleigh Chamber of Commerce, which attracted an estimated audience of 600 to the Progress Energy Center for the Performing Arts in downtown Raleigh.
Another speaker, Matthew Martin, senior vice president and regional executive with the Federal Reserve Bank of Richmond, said it’s more than just fear of the unknown that is curbing corporate spending plans. Question marks about the future of taxes, health care costs and the like can hinder companies from doing the dollar-and-cents analyses that are part and parcel of major investments.
“The way it was expressed to me by one manufacturer was, ‘I can’t do the math, I can’t run the numbers, so I am just going to sit on the sidelines until I have more certainty on the cost side of things,’ ” Martin said.
Given the state of politics in the nation’s capital, that certainty may or may not materialize by March 1, which is the deadline for reducing spending before an 8 percent cut in the military, education and other programs takes effect.
The federal government also is expected to hit the debt ceiling around March 1.
The question marks figure into Brown’s forecast for a sluggish, less-than-hoped-for 1.5 percent growth in gross domestic product this year, followed by 2.4 percent growth next year.
Martin is a bit more optimistic, forecasting that GDP growth will be in the range of 2 percent to 2.5 percent.
Both Martin and Brown were more upbeat when discussing the local economy.
“Yes there is some pain in the (economic) forecast here this morning, there are some risks out there,” Brown said.
“But I think when we step back and look at the Raleigh area, the Raleigh metro area in particular, I think there are a lot of good things to talk about.”
He said the Raleigh area has been outperforming the national economy, and is expected to continue to do so thanks in large measure to its concentration of well-educated workers.
Nationally, Brown noted, unemployment among those with a high school degree exceeds 12 percent, while unemployment for those with college degrees hovers around 4 percent.
“It’s a disconnect between the skills in the labor force and the skills in demand by companies,” Brown said. “You talk to manufacturers, you talk to folks in financial services, and they tell you they are having trouble finding qualified workers. That’s sort of a scary story when you consider the number of folks that are still looking for work.”
But in this region “the unemployment rate is just below the national average, and we expect that to continue to come down,” Brown said. “There are a lot of good fundamentals tied to the highly qualified, highly skilled work force locally.”
The Triangle’s unemployment rate was 7.6 percent in November, after adjusting for seasonal factors. That compares to North Carolina’s 9.1 percent jobless rate and the national rate of 7.7 percent.
Martin forecast that in 2013 North Carolina “will add jobs at a rate faster than the national economy, and I think Raleigh will be at the forefront of that.”