Economist: Recession chances in Ascension depend on national economic severity
The rate of consumer holiday shopping during the weekend after Thanksgiving should give forecasters an indication of the length and depth of the current national recession, said a noted LSU economist.
Speaking at an EATEL and LSU Continuing Education sponsored Growing Your Business in the New Ascension seminar in Gonzales Wednesday, Dr. Jim Richardson said the recovery is “almost in the hands of the consumers” who, if they decide to cutback on spending, will make the recession more severe.
Richardson, who also serves as director of the Public Affairs Research Council, said he expects the national recession to work its way down to Ascension Parish, and that retail and service sectors here will be affected.
Whether the recession will be “a bump or a cliff,” is still unknown, Richardson said.
The 1975-76 recession is the only recession since the Great Depression which actually saw consumer consumption fall to negative levels during the recession, Richardson said.
“The big concern today is what has happened to consumption,” he said.
Ascension Parish exports, such as plastics from area plants, will be negatively affected when national and global manufacturers cut back on production of automobiles and other products, he said.
Richardson noted that Ascension’s workforce has changed since 2000 when 40 percent of local labor was employed in construction. Today, he said, the construction workers are down to 15 percent, and greater labor percentages are found in the service and financial sectors.
On the positive side, while Richardson sees a downturn in growth in the Baton Rouge area, a drop in absolute numbers regarding housing, manufacturing, construction and other areas of the economy is not expected.
The severity of the local recession will ultimately depend on the severity of the national recession, he said.
Richardson, co-author of the Ourso College of Business “Louisiana Economic Outlook,” stressed “we are not in a world will fall apart mode” on the economic front.
Most economic forecasts do not see a repeat of the Great Depression, he said. Most economists predict that in the second quarter of 2009, the economy will reverse itself and return to the black.
“The financial system is kind of like church,” Richardson said. For the system to work, “you have to believe in it.”
Consumer spending through December will show whether consumers have faith in the system, he said.
Richardson said the incoming Obama administration ought to place a moratorium on any tax increase for three years to aid the recovery.
“Nothing says you should punish capital markets when they are down,” he said. And, he suggested the new administration needs to invest in infrastructure, highways, bridges and waterways.
Richardson listed area economic indicators, including $6.5 billion in construction projects, and expansions at chemical corridor plants as healthy signs for the Greater Baton Rouge economy.
But, Louisiana as a whole has lower oil prices to worry about when it must, by law, balance its budget next year.
National demand for oil has already dropped, and world oil demand is expected to drop into negative territory by the end of 2008, Richardson said. For each $1 per barrel that oil drops, the state loses significant revenue when the price goes below the state’s budgeted price per barrel.
Other speakers at the 2nd annual business seminar conducted by EATEL included Skip Bertman, LSU Director of Athletics Emeritus, Parish President Tommy Martinez, Ascension Chamber of Commerce President Sherry Despino, EATEL President Robert Burgess, LSU Continuing Education instructor Courtland Chaney, Jon Cato with Object 9, and executive recruiter Craig Sweeney.