The Maryland Bankers Association held its annual “First Friday Economic Outlook Forum” in Baltimore last week, in which a panel of economists opined about the Maryland and national economies. A group of MACPA volunteers and staff attended to gain some insight on where we’re headed.
Moderating the panel was Anirban Basu from Sage Policy Group, who is well known and much appreciated in the Baltimore/Washington area.
The panelists were:
What comments from the panelists stood out?
- The national recession ended in mid 2009 and we’ve had six quarters of positive GDP since then. However, we’re experiencing a bad economic hangover that will take several years to work through, especially with unemployment and housing.
- Washington, D.C.-area unemployment at 5.8 percent is the best in the nation. Baltimore-area unemployment at 7.4 percent is No. 4 nationally. That’s the good news. Western Maryland unemployment (measured by county) ranges from 6.6 to 9.4 percent, while Eastern Shore unemployment ranges from 6.2 to 10 percent. Nationally, unemployement is going to take some time to resolve, with the panelists projecting 2011 unemployment in the high 8 to low 9 percent range and possibly around 8.5 percent by the end of 2012.
- The panel felt additional quantitative easing by the Federal Reserve is necessary, although they simultaneously expressed concern that, long-term, the U.S. needs to get its fiscal house in order … just not this year. That being said, they stressed that we’re not Greece, Ireland or Portugal.
- Projections for 2011 GDP ranged from 2.9 to 4.5 percent, with a mean of 3.6 percent.
- Jeffrey Schappe of BB&T sees housing starting to deteriorate again nationally and projects another 10 percent drop in residential real estate prices. Given the current foreclosure “overhang,” housing will take years to work out. Housing inventory across Maryland has increased from a year ago giving some credence to Shappe’s expectation that prices will drop further. He doesn’t believe a 10 percent drop would cause a “double dip” recession.
- Bank of America’s Michael Hanson believes inflation is not expected to be a factor in the near term, noting that inflation tends to fall coming out of a recession. In addition, the economy still has a lot of slack which trumps liquidity and rising commodity prices.
- BB&T’s Jeffrey Schappe has a bullish outlook for the stock market, noting moderate economic growth, stimulative monetary policy and lack of inflation are all positive for the market.
- The group felt that a recovery will be driven by large businesses, with Jeffrey Schappe stating that obsolesence plays a huge role in this technology-driven economy and companies are going to deploy capital to stay ahead of the competition.
- Michael Hanson noted that state revenues have started to rebound since states are more reliant on sales and income taxes. The 96,000 municipalities in the U.S. rely more on property taxes and will continue to suffer for a time. Studies indicate that there is a two year lag between the bottom of the residential real estate market and the bottoming out of corresponding property tax revenues.
The one point left unaddressed was whether this is just another recession, admittedly a severe one, or whether we’re witnessing a fundamental change to a less vibrant economy and a more austere lifestyle. A move to a “new normal” in our economy has been discussed in the past at CPA Success here and here. I tend to think we’re in a different world today.
What do you think? Are you optimistic we’ll bounce back after this severe recession or has the US economy fundamentally changed?