-newsobserver.com
A year ago, as North Carolina’s unemployment rate climbed past the national average and many areas began to feel the effects of the recession for the first time, economists looked toward 2009 with hope, saying it would surely bring a turnaround, if not a full recovery. This summer, they declared that the recession had ended, and for a few months, data on jobs and spending seemed to creep upward.
Yet for many, the pain lingers. A record number of people remain out of work. Wages remain stagnant for the employed. Customers remain hesitant to buy.
And as we ready to enter a new year, the question looms: When will it end?
Economists are mixed on the answer but agree that it depends on jobs, paychecks and spending. While 2010 will be brighter, they say, it could take years for those indicators to reach the levels of earlier this decade.
“It’s going to end at a different time for everybody,” UNC Charlotte economist John Connaughton said, adding that most will begin to feel better over the next six months. “Most people are hanging by a thread.”
The Triangle has fared better than much of the state, where unemployment was at 10.8 percent in November. The Triangle has benefited from its strong ties to education, health care and technology, as well as federal stimulus money earmarked for research. The Triangle’s unemployment rate was 8.9 percent in October,after being adjusted for seasonal effects. The November data will be released Jan. 5.
Across North Carolina, the economic plunge was deeper and has lasted longer than many imagined because of hits to the state’s long-suffering manufacturing sector and once-prosperous banking sector, and the resulting ripple effect on jobs and consumer credit.
In recent months, there have been hopeful signs: Layoffs have slowed, and temporary employment - often a precursor to permanent hiring - is up for the fourth straight month.
But this recession stretched almost two years, much longer and deeper than others in recent history. That has had a profound psychological impact on people, said Scott Huettel, an associate professor of psychology and neuroscience at Duke University.
“We’re not really set up to deal with these sudden shocks,” he said. “When suddenly the world changes under us, our brains aren’t really set up to deal with [it].”
That’s why many people pulled their money out of the stock market when it plunged, Huettel said. What’s more is that, regardless of the recession’s length, people will remember how bad it was at its worst, he said.
“It was really, really bad for people at different stages of it,” he said. “… The psychological impact of something like an extended recession may be worse than the actual hit.”
Waiting, but hopeful
Alicia Keisler, 35, of Raleigh lost her banking job in August. She thought for sure she’d have a new job within six months.
Keisler has been on several interviews but with little luck. One company called recently to tell her they wanted to offer her a job, but they were forced to freeze the position until February, she said.
But she remains upbeat, saying her phone has been ringing more in the last month.
“I’m hopeful,” said Keisler, who is relying on her unemployment insurance for now. “I won’t say there isn’t anything out there.”
Those who have kept their jobs are hurting, too. Many still fear layoffs, and many struggle to pay the bills as companies have frozen wages, eliminated benefits or slashed bonuses.
Sinking salaries
Nationally, private-sector workers’ wages increased just 1.3 percent in the six months ending in September, less than 40 percent as fast as the growth over the past few years, according to the Economic Policy Institute, a think tank in Washington, D.C.
Meanwhile, labor productivity in the second quarter jumped 6.6 percent, the largest gain since 2003.
Last quarter, the economy grew 0.8 percent over the quarter before, though corporate profits climbed 13.4 percent - indicating that companies are doing more with less, said Joe Keating, chief investment officer at the Raleigh-based RBC Bank.
In the Triangle, private-sector wages fell 5 percent this year, and finance wages, which make up 7 percent of the Wake County payroll, were down 4 percent. Again, that was better than much of the state. In Mecklenburg County, where bankers’ wages make up the biggest chunk of the county’s payroll, overall wages in the private sector fell 15 percent.
With unemployment so high, employers overall feel little pressure to raise salaries or reinstate benefits.
As jobs and wages have fallen, consumer spending has taken a hit.
Wake County pulled $777 million in retail sales in September, down 17 percent from the previous year.
Spending is expected to loosen next year, though it could take two or three years to bounce back to previous levels. In some cases, the psychological effect is just as strong as the financial worries and could take longer to undo.
“There are those who suggest we have entered a phase of frugality,” particularly as the big-spending baby boomers retire, said Connaughton, the UNCC economist. “Will we ever get it back?”