The national economy is beginning—or is likely to soon begin—a recession, the noted economist James F. Smith told an auditorium full of business people at the Asheville Area Chamber of Commerce’s eighth annual Asheville Metro Economy Outlook presentation last week.
That’s the bad news. The good news? Asheville is doing quite well, thank you, and will likely continue to do so despite how the greater national economy is faring, according to Tom Tveidt, an economist who heads up the chamber’s Metro Business Research Center.
During the dual presentation, held June 27 at the Diana Wortham Theatre, Smith said that the national economy is growing and productivity is up. However, one of the most ominous signs of recession—an inverted yield curve on Treasury notes—is upon us, said Smith, a professor at Western Carolina University and chief economist at Parsec Financial Management in Asheville.
A quick Econ 101 primer on yield curves: An inverted yield curve results in an interest-rate environment in which long-term debt instruments (in this case 10-year Treasury bills) have a lower yield than short-term debt instruments of the same credit quality (namely three-month Treasury bills). This type of yield curve is odd, but it’s considered to be a nearly fool-proof predictor of economic recession. As a result, with the latest inversion that began last July, the country most likely slipped into recession sometime in May, he said, noting that recessions usually begin as soon as nine months after the inversion begins.
And while Smith is one of the more bearish economists out there (“We’re falling off a cliff,” he recently told the Wall Street Journal), he believes the recession will be short-lived and fairly mild. And, if other historical indicators bear out, if the short recession is followed by a “roaring recovery,” then expect Republicans to retain the White House. If not, then Democrats can pretty much punch their ticket, regardless of whom they nominate, he predicted.
So what about Asheville? Well, locally, the picture is much brighter. Tveidt told the crowd that real estate still remains strong here, even if the bubble has burst elsewhere. Unemployment is low, locally, with practically all sectors showing positive job growth—including the beleaguered manufacturing sector, which has shrunk over the years but is now creating higher-skilled, higher-paying jobs. Even Asheville’s typically low wages are showing signs of improvement, he said.
“Wages here are lower, but they’re catching up,” he said. “We’re not there yet, but we’re heading in the right direction.”
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