Economic forecasts due for Muskegon and Grand Haven
Although economist George Erickcek could not provide details of his forecasts in advance, he did tell the Business Journal that the current recession is different, compared to previous recessions.
Erickcek will be speaking to the members of the Grand Haven/Spring Lake/Ferrysburg Chamber on Tuesday morning and to the Muskegon Area Chamber of Commerce Friday morning.
Erickcek, who has already provided his 2009 forecasts to the chambers in Grand Rapids and Holland, said he sees the current recession as distinctively different in Michigan in three ways. The first difference is that, unlike the last two recessions in 2001 and 1991, the current recession "has been felt in the auto industry. Auto sales now are dragging the bottom at 10.1 million units on an annual basis. We haven't seen such a low volume since 1983."
The second difference is the ongoing shortage of credit, despite the federal bailout of the U.S. banking industry.
His third reason for the difference is the fact that this recession is global.
Due to the continuing bad news about job losses, "the consumer is backing away. We have consumer confidence down at very low levels," he said.
"This combination of factors, I fear, will make this recession, this downturn, much more severe than 2001 and 1991."
At his Holland forecast early in January, Erickcek presented a graph that showed significant increases in jobs in that region in the years after each of the three U.S. recessions in 1973-1975, 1980-1983 and 1990-1991. However, since the recession of 2001, there have only been two years in which there was an increase in jobs, and those were both under one-half of 1 percent. Job losses in almost all of the other years since 2001 have ranged from almost 2 to 4 percent.
Job losses in the recession of 1975 and again in 1980 "went down pretty deep but they came right back," said Erickcek.
West Michigan actually fared quite well during the U.S. recession of the early 1990s, when "Holland decided not to have a recession," joked Erickcek.
After that recession, there continued to be increases in jobs every year until 2001, when Holland area jobs dropped about 3 percent. Since then, said Erickcek, there have been only two years of actual employment growth in the Holland area.
“Unfortunately, I think this may be the pattern we will experience after this downturn, as well," he said.
"We're still seeing the economy restructure. Every time we get a recession, not all the jobs come back. And I fear there's going to be kind of a sluggish return in terms of employment, coming out of the 2009 recession, as well."
The federal government's unemployment estimate for the Muskegon metropolitan statistical area in November was 10 percent. In November 2007, it was 6.7 percent.
But West Michigan isn't faring as poorly as other parts of Michigan. In northwest Michigan, in an area reaching from Manistee to Traverse City, the unemployment rate in November was 10.4 percent. In the thumb region, unemployment was pegged at 12.2 percent.
Erickcek said we will not know until early February what happened in the fourth quarter of 2008.
"Most economists believe that the fourth quarter of last year is the quarter that we're going to see the biggest drop," said Erickcek, noting that some economists predict that the quarter's drop in Gross Domestic Product was as high as 5 percent.
In December, the U.S. Department of Commerce/Bureau of Economic Analysis reported the GDP decreased at an annual rate of one-half percent in the third quarter of 2008.
When asked if the new administration in Washington will have an impact on consumer confidence, Erickcek said he does think there will be an uptick.
"I think there is a level of excitement that a new approach in government policy is going to be enacted," he said.
Erickcek said there are two ways the federal government can impact the U.S. economy: by fiscal policy (spending of government funds) and monetary policy (raising and lowering interest rates, etc.), and monetary policy is "pretty much tapped out," he said, noting that interest rates now are close to zero and still there is "no lending."
That leaves "fiscal policy and government spending, and here, I think, there is going to be a challenge" to the Obama administration, said Erickcek. He said Congress may choose a more cautious approach that does not produce a stimulus package large enough to get the economy moving. There is also a challenge in the amount of time Congress takes before it acts.
"We may not see a stimulus package until July, August … maybe even September. That's kind of late. I think a lot of people would like to see it much sooner than that. And I think it's simply almost impossible for the federal government to respond that quickly," he said.
All in all, however, Erickcek said he does believe there will be an uptick in consumer confidence, and he feels the economic indicators will begin to improve in 2009.