Crystal ball

The economy may not be as shaky as it was, but many people are still struggling, and rising gas and food prices are affecting everybody’s budget. In Asheville, as elsewhere, there's a sense of uncertainty about just what the economic future might hold.

“Supposedly we’re not in a recession,” UNCA economics professor Joe Sulock told a mostly older audience, just finished sipping wine and eating hors d’oeuvres, at UNCA’s April 21 Economic Crystal Ball Seminar. “If that’s the case, why do I feel like we are in a recession? The price of oil is trying to climb Mount Everest; state budgets are in disarray; you’ve got a federal deficit that is alarmingly high; you have a housing market that may be off life support but is hardly full of life. If we’re not in a recession, I ask, where are the jobs?”

But economists David Berson and James Smith, the seminar’s headliners, struck a far more optimistic note as they spoke to the group of students, professors and retirees. The economy is recovering, they declared, and it won't be undone by rising oil prices or distant political turmoil.

“Economic growth is accelerating, job growth is accelerating, and in the next 12 months, we will see net private increases of 2 to 2.5 million jobs — and I think that’s being conservative,” predicted Berson, a former chief economist for Fannie Mae who’s currently working for the PMI Group. “That’s still not tremendously strong, but it’s better than what we’ve seen for the last two years.”

“I know why Joe thinks it’s still a recession: He works for the state, and the state is broke,” quipped Smith, chief economist at Parsec Financial. “I’m here to convince you things are much better than what you see and hear — that they’re going to continue to get much better.”

Federal, state and local governments, he noted, are stepping back from “fiscal oblivion,” growth has returned, and “We are not going to be derailed by anything that we know about right now,” including oil prices, budget cuts, Japanese earthquakes and the upheaval in the Middle East. (Berson, though, did warn that excessive cuts in government spending could be damaging in the short run).

Good news, bad news

But Alexandra Sirota of the N.C. Budget and Tax Center, a nonprofit that analyzes the effects of policies on low-income residents, sounds a somewhat different note.

“We are seeing, generally, movement in the right direction,” she concedes. “What isn't generally being discussed is that we still have a significant amount of jobs to replace in order to provide work opportunities for all those who want to work. We don't talk enough about the fact the labor force isn't growing as fast as it generally does in a robust economy.”

Against that backdrop, Sirota finds the proposed state-budget cuts troubling. “We're really concerned with what's coming out of Raleigh and the private sector. If we see the significant cuts proposed in the House bill, for example, that will reduce employment and private contracts too — many of them with small businesses. Those sorts of decisions … can have a significant impact on the trajectory we're heading in.”

One in three North Carolinians, Sirota notes, is either unemployed or underemployed: Even if they have a job, they're not earning enough to make ends meet.

“We're seeing underemployment levels that are very high,” she says. “Especially as we focus on job creation, we need to make sure the jobs are good-quality jobs that pay a living wage that someone can support their family with, and get access to benefits. In 2010, the jobs being created were mostly low-wage jobs.”

That's a particular problem in the Asheville area, where the retail, service and hospitality sectors employ a combined 42,900 people — a virtual city within a city.

“Those folks are facing less likelihood of additional hours they may have gotten for seasonal jobs, especially in the hospitality industry,” says Sirota. “We're seeing folks struggling to change careers as community college becomes less affordable.”

Forking paths

Berson, meanwhile, explains that as the economy recovers, the job market “becomes more bifurcated. You have more lower-paying service jobs and more higher-paying service jobs. In manufacturing, there were fewer differences. What it suggests is, there are even greater dividends to education today than at any time before.”

At the Crystal Ball Seminar, both Berson and Smith spoke about a “two-track recovery”: Big corporations are bouncing back, but the small businesses that account for most of the jobs are struggling.

“Small-business people are half the GDP; new small-business people are most of our entrepreneurs,” noted Smith. “New businesses created 75 percent of our new jobs in the last five years. We need to get small business [going] to get the economy going. What can you do?” he queried. “Get out and shop.”

Sirota, however, says the problem for small businesses isn’t just a lack of customers but a lack of capital.

“Folks are having a hard time accessing the credit they need to expand or start their businesses and really contribute to the job creation we need to be seeing,” she asserts.

At the seminar, Berson warned, “Every forecast an economist or anyone else gives you is going to be wrong.” The important thing, he said, is getting the basic direction right.

But that direction, cautions Sirota, is still up in the air and will depend on the policies governments implement to deal with the economy.

“Decisions being made at the state and federal level will have an impact on the local ability to create the jobs families need,” she emphasizes. “Young small businesses are critical to job creation, and the more we can target our policies to support [those efforts], the better.”

— David Forbes can be reached at 251-1333, ext. 137, or at dforbes@mountainx.com.