Outlook Bright for Local Economy, but Little Hope for Long-term Jobless
A national economist told a vast crowd of Winston-Salem business leaders that the future is bright for those who continue to innovate and deal with structural changes in the marketplace.
The crowd of about 500 people attended the State of the Economy luncheon, co-sponsored by the Winston-Salem Chamber of Commerce and the Winston- Salem Rotary Club. The event was held at the Benton Convention Center.
In addition to the keynote speaker, the event served as the debut of the Winston-Salem Chamber of Commerce’s publication WS Works. An 80-page glossy magazine, WS Works highlights recent trends in economic development.
“It is dedicated to showcasing Winston- Salem and Forsyth County,” said Scott Sewell, current president of the Chamber of Commerce. “Business is very important
to the future growth of Winston-Salem. We need to tell the story of business to let people know what businesses have done for the community over the years.”
Dr. Lawrence Chimerine, president of Radnor International Consulting, in Radnor, Pa., offered “a relatively optimistic outlook for the economy.” Offering a survey of 15 economic dynamics, Chimerine said that competition was still the key to success.
Chimerine held up the automotive and telecommunication sectors as examples where increased competition has transformed the larger economy. There are 15 countries exporting automobiles, he said, and two more set to begin next year. In telecommunications, deregulation since 1987 has caused “an extraordinary change.”
On inflation, Chimerine said there was little realistic concern that Federal Reserve action would harm the economy. “The economy no longer has a bias toward accelerated inflation,” Chimerine said. Quite the opposite is true, as competition leaves little room for price flexibility.
This is critical because with no room to raise prices to absorb increasing operating costs, businesses have turned to efficiency and increased productivity to remain profitable. In such a competitive environment, Chimerine pointed to the fundamental factor that separates successful firms from the pack.
“You can’t sit at your desk waiting for orders to come in,” he said. “You have to be proactive.”
Five years into a recovery that feels to some like a standstill, Chimerine said the damage to financial institutions and the housing market still hampered growth. Financial institutions are reluctant to lend despite the Federal Reserve’s pumping of money into the economy. Saddled still with a large volume of bad loans, banks are still working off those problem loans.
A lack of housing starts was just as problematic, given that consumers tend to spend about nine percent of a new home’s price on furnishings and appliances. This drained other consumer sectors of activity.
New construction remains slow, but according to figures released by the Winston-Salem Regional Realtors Association, existing home sales are at record levels. Glenn Cobb, chief staff executive for the association, said the region just completed 30 consecutive months of increased real estate sales.
“We haven’t seen a streak like that so it’s very encouraging,” Cobb said. “Everything is turning more into a sellers market. Asking and closing prices are in line with each other.”
Cobb said that recent sales included increases in discretionary and high-end homes with values more than $1 million. “Because those buyers are back in the market that means there is more con fidence in the economy,” he said. “You don’t risk selling your home if you are worried about not having a job tomorrow. When we see discretionary and move up buyers that is very encouraging.”
ECONOMY: Pace of recovery expected to increase
Moving forward, Chimerine predicted growth to pick up as government austerity measures have been absorbed and will no longer cause a drag on economic activity. As the Federal Reserve cuts back on the free flow of money, built up bank reserves should be forced into circulation. “Nothing the Fed will do will hinder the economy in the next four years,” Chimerine said.
One thing Chimerine remained sanguine about was the outlook for the long-term unemployed. With most productivity gains coming on the backs of labor, there has been little improvement in structural unemployment. Given technological advances, many of the unemployed have skills that are not matched to the current job market.
“That will have to be a bigger part of national policy moving forward,” he said.
Winston-Salem Mayor Allen Joines attended the event and came away hopeful, despite obvious concerns about lingering unemployment. “Job replacement will continue to be low because businesses have found ways to be more efficient in their operation,” Joines said. “It’s as if we’ve created a new normal in terms of job levels.”
When asked what the potential bright spots were for the local economy, Joines said advanced manufacturing and hitech firms continued to expand in the city. He cited examples such as information technology firm Inmar, and advanced manufacturing at Caterpillar and, to a certain extent, HerbalLife.
“There is going to be more opportunity for advanced manufacturing,” Joines said.
“We are well poised for that with Forsyth Tech and their ability to provide training.”
Programs such as welding and metalworking at Forsyth Tech increase the area’s potential to attract more jobs. But there remain a significant number of workers whose skills are outdated. Advanced manufacturing requires updated skills such as improved reading and computer usage, and the ability to work in teams, Joines said.
“It is incumbent upon us to make sure we communicate to individuals what those jobs look like so they can get retrained,” he said. “There are pockets of improvement and there are great examples of individuals stepping up and being retrained. But there are still areas of our city where the poverty rate is way too high. Our challenge is to find a way to reach those individuals who may have given up hope.”
Chimerine hinted in his speech that austerity measures to reduce government spending and the focus on reducing entitlements such as unemployment and poverty assistance had actually worsened the economy at a time when it was most sluggish.
Joines echoed those comments when asked about the unemployment numbers that have recently appeared to show improvement. “Some of that is due to people leaving the job market or not signing up because of the benefits being cut by the state,” Joines said. “Our real unemployment is probably a bit higher than the numbers will show.”
The mayor added that he feels there are some misconceptions about the plight of the long-term unemployed. “The folks I talk to tell me ‘Mr. Mayor I’m looking for a job, I just can’t find one.’” !