2009 Economic Forecast by Dr. Albert Niemi
(Notes by Bill Cooper)
Your Cobb Chamber of Commerce has been taking notes for a number of years, providing our membership with Dr. Niemi’s prognostications. I will attempt to summarize his remarks in a “bullet point” format for ease of reading. First though, I would like to review his main conclusions from last year’s speech.
Dr. Niemi’s comments last year proved to be very prophetic, given where the economy is today. The only issue one could take with last year’s remarks was that he wasn’t as pessimistic on the 2008 economy as it has turned out to be. He said the economy would be slowing in 2008 for three reasons. He was exactly correct when he identified the housing industry as the main culprit. The second factor he cited was the sub-prime mortgage market and the tribulations of the financial industry.
Third was his prediction as to the cost of energy, predicting the cost of oil would rise to $180 to $200 a barrel. He was right on with that one! No one was even thinking of oil prices at that level. He even mentioned the dreaded “R” word last year, as in “Recession”, rearing its ugly head, possibly in 2009.
As I said, he was right on with the issues. He only failed to anticipate that all these issues would come together to make the “perfect storm” in early to mid 2008, all hitting at the same time and accelerating his timetable by six to eight months. Personally, I would say his predictions were remarkable, given that the economy was at full speed in late 2007 when he spoke to our business community and given that Georgia had not faced anything close to a recession in 40 years.
Now for 2009
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Dr. Neimi’s prediction last year of a “Leftward turn” in politics was obviously prophetic.
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Recession:
- New territory for young people. Nationally, only 14 months of recession in 25 years.
- Started in July, 2008.
- Longer than any post-WWII recession. Not out of it until late 2009, probably early 2010.
- Unemployment currently at 6.5%. 8.5% by late 2009. If no auto bailout, unemployment goes to 10-11% (3.5 million jobs in auto industry).
- Neimi does not agree with bailout. Are we bailing out companies or workers? Workers are overpaid at $73/hour vs. $48/hour for foreign auto makers. Union power and lobbying.
- Worst problems in the Northeast.
- Georgia is still a growing, optimistic, market oriented, and pro-business state. The state will suffer less.
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Stock Market:
- Most volatile market since Depression. S & P 500 down 50% in 12 months.
- Then November 21st through 26th up 17%-Biggest gain since 1932.
- Then the market lost ½ of that gain in one day.
- Market will bottom out 5 to 6 months prior to end of recession.
- April through June of 2009. This is time to buy stocks.
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Credit vs. Growth/Ending Recession:
- No credit available leads to recession. With “credit crunch” no buying is possible.
- Holding back the economic recovery. We borrow to buy houses, cars, education, etc.
- With evaporation of credit, Neimi does not know how it will work itself out.
- Much debt repackaged and sold to overseas institutions leading to their problems.
- Large debt burden overseas.
- Past excesses of credit will slow the recovery through 2010.
- Growth will be below 3% from 2010 to 2014.
- We have too much of everything financed with debt - cars, houses, retail goods, colleges.
Long Term:
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No population growth in Europe and Japan; no economic growth; highest cost for labor.
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Contrast:
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The United States will grow 55 million people between 2010 and 2030 through birth and immigration.
- No long term stagnation
- 60% of growth in 5 states: Florida, California, Georgia, Texas and North Carolina.
- Move to high quality states accelerates in these 5 states.
- Long term these states have great strength.
- Currently residential and commercial is overbuilt and it will take until 2010 to work through.
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Georgia:
- Long term advantages-2008 projects bring 20K new jobs (Kia and suppliers = 6,500 to 7,000)
- BRAC-Realignment of bases good for GA. 4,000 new jobs.
- Georgia grows twice as fast as national average.
Long Term Concerns:
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Erosion of middle class-U.S.A. based on manufacturing (middle class jobs).
- Declining for the past 10 years. Manufacturing jobs in the United States peaked in 1999.
- Medium income down for first time ever due to lost manufacturing jobs.
- 30% to 35% of workforce in past; now 11% of jobs in manufacturing.
- Eg. Walmart is growing, leads to erosion of middle class jobs.
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Education of Minorities:
- Two thirds of minorities not graduating 30 years from now.
- Black and Latino are making up more of workforce-must enable them to make more dollars.
- Need higher incomes to support selves and growing retirees.
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Taxes:
- Currently paying a minimum of 50% in taxes to local, state and federal entities.
- Includes income, property, gas, sales, etc.
- Erosion of middle class=less taxes collected.
- 2007: Top 1% paid 40% of income tax. 40% paid 71% and top 50% paid 97% of taxes.
- Bottom 40% paid NO income tax. If Obama does as said, 47% will pay NO taxes.
- Corporate income tax=35% now. Barack says raise to 45% which will kill business.
- If tax high income people and business, low income people hurt. (Housing, retail, restaurants).
- Good example was the “Luxury Tax” which destroyed the boat industry.
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Government:
- Broken!! Need term limits. It seems that campaigning is more important than serving.