Ho-hum, economy continues to stumble
NW economist says world's troubles could hit U.S. pocketbooks
The 2012 economy should look a lot like 2011, predicts longtime local economist John Mitchell: slow growth, a modest uptick in jobs and huge uncertainty about the impact from international events.
The economy is growing, and there are glimmers of hope that the housing market -vital to a wood-products center like Oregon -is recovering, Mitchell said Wednesday at a Portland Business Alliance breakfast.
Oregon had the 20th-highest job growth among the states for most of 2011, and 46 states showed year-over-year increases in employment.
'In January 2010, two did - North Dakota and Alaska,' Mitchell said.
Manufacturing is up at top Portland-area employers such as Intel, Gunderson and Daimler, Mitchell said.
Private-sector employment continues to rise, but it's being offset in part by job reductions in state, local and federal government.
'It's a tale of two cities,' Mitchell said.
Nationally, the economy has regained about 2 million of the jobs lost during the recession, but it has a long way to go to make up all of the 6.1 million jobs lost since the start of 2008, according to Mitchell.
Most troublesome, he said, is that the average unemployed person has been out of work 40 weeks That's particularly damaging for younger workers, whose future income might be depressed for decades, he added.
Nationally, people aren't moving as much, Mitchell said. That limits the influx of newcomers to Portland that has helped spur the local economy.
In housing, the Portland area has slightly fewer homeowners owing more on their home loans than their properties are worth, which is known as being 'under water.'
For those buying a home, it's hard to remember a time when housing has been so affordable, Mitchell said, after a 30-percent drop in prices and mortgage rates that dipped below 4 percent at times.
'I with I was in the market for a new house,' he said.
A troubled world on edge
Dysfunction among federal leaders didn't help in 2011. Mitchell cited three 'spectacular failures': stalled approval of the debt ceiling increase, which caused the downgrading of the U.S. credit rating; the inability of a congressional 'super committee' to reach a budget-cutting deal; and Congress passing only a two-month extension of the Social Security tax holiday. Big deficits are 'a real serious problem that we have continued to punt on,' he said.
Mitchell, in line with most economists, predicted that inflation will be lower in 2012, and the job and housing markets will continue to improve.
His biggest concern is Europe and its debt crisis. The common currency for much of Western Europe, the euro, just turned 10, but he said it may not survive long enough to celebrate its 11th anniversary.
'Stuff half a world away can impact our performance,' Mitchell said.
In 2011, it was the Japanese earthquake and tsunami, which rocked auto manufacturing; and the floods in Thailand, which affected the supply chain for many electronic goods. Nobody could predict the Arab Spring either, he said, referring to the series of uprisings in the Arab world.
A possible recession in Europe, and declining growth in China, could be a drag on the U.S. economy in 2012, Mitchell said.
Another potential crisis looms in the Persian Gulf, where a war of words could threaten that vital shipping channel for oil.
'I get nervous when I see posturing people that are heavily armed,' he said.
Though many foreign investors scooped up U.S. government bonds in 2011 despite the downgrading of our credit rating, Mitchell warned that times could change.
He asked Portland business leaders to imagine if they were the Athens chamber of commerce five years ago. Everything would have seemed rosy then, he said, though the nation was heavily dependent on deep borrowing.
How long, Mitchell asked, can the U.S. continue to borrow from the world to pay its government bills?
'The Greeks found the wall. The Italians found their wall,' he said. 'Where's ours?'