« May 2010 | Main | July 2010 »

June 30, 2010

Boom or bust for small towns?

Small towns have had a tough time in many parts of our state as well as in the country, but now some are expressing new optimism about the future of those small towns. What is this positive view based on?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"You are right ... about small towns. We look here in North Carolina, many of our small towns were based on traditional industries like textiles and furniture and, of course, those industries have downsized and that has hurt the small towns.

"There are people who are very optimistic about small towns. They see technology like the Internet as the savior for small towns because they say look with the Internet businesses, people can locate anywhere because they can get information instantly, if you will, over the Internet. So what the Internet does is really reduce the effect of space. And they argue that many of these small towns with great amenities, great outdoor elements, etc., can therefore attract more people and more businesses. So they look for small towns to turn around.

"But there is another side to this coin. There are those that say, 'No. No actually modern technology is going to increase the influence of big cities, because what modern technology does is allows someone -- allows a company -- to expand their ideas more rapidly across the globe and, therefore, you want to be in an area, a big city, where you can make the contacts to start that expansion.'

"So these folks say that contrary to the first theory, actually technology, the Internet, etc., is going to expand the influence of big cities to the detriment of small towns. Obviously we will have to see how this debate plays out."

Posted by deeshore at 11:14 AM | Comments (0)

June 29, 2010

Unequal pain

Finally the job market appears to be turning around for the better, but when we look back at where the job losses occurred during the recession, do we see any difference by size of business?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"We do. ... In fact, the pain has not been distributed equally among size of business. Small businesses have been hit very, very hard. For example, businesses with under 50 employees, which actually account for 40 percent of all jobs, actually were responsible for losing half of all the jobs between December 2007 and June of 2009.

"Now you did mention we are beginning to see a job turnaround, and we are -- during this turnaround, we are -- seeing the same kind of pattern. That is, larger businesses have actually been gaining jobs. Businesses with 50 to 250 employees have about broken even, and businesses with more than 250 employees have gained jobs since June of 2009, but small businesses unfortunately have continued to lose jobs. So it is really the small business that has really taken the brunt of these job losses."

Posted by deeshore at 08:56 AM | Comments (0)

June 28, 2010

Tax losses

It has been a tough couple of years for state governments around the country. Most have seen their tax revenues drop at the same time that states have tried to help residents cope with the recession. How has North Carolina fared in its revenue situation relative to the other states?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Let's look at the change in state revenues from 2008 to 2009. We obviously don't have 2010 numbers yet. During that year period, all but five states in the country lost state revenues. Only five gained; 45 lost. Among the 45 state losing revenues, North Carolina's loss in percentage terms was 13th highest, so we were up there.

"In terms of states with the biggest relative losses that is percent of their revenue, Alaska was number one, followed by Arizona, South Carolina, New Mexico and California. And who were those lucky five states that actually gained revenue? They were Wyoming, North Dakota, Oregon, Iowa and South Dakota."

Posted by deeshore at 08:00 AM | Comments (0)

June 25, 2010

Cost of living

We frequently hear statistics measuring the national cost of living. But do we have any data telling us how the states rank on the cost of living?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"We do. ... This is courtesy of a group called the American Chamber of Commerce Researchers Association. They put out quarterly data on the cost of living by state. So the data I am going to quote here are from the fourth quarter of 2009.

"The top 5 most expensive states are Hawaii, the District of Columbia -- although technically not a state but obviously an area in the country -- California, Alaska and New Jersey. Those are the top 5 most expensive.

"The five lowest cost states are Oklahoma, Tennessee, Arkansas, Kentucky and Kansas. Now where did North Carolina rank? We ranked as the 13th most expensive state. So we were in the bottom half, if you will, in terms of cost of living.

"And, indeed, if you look at the Southeast, our cost of living is actually lower than the cost of living in Florida, South Carolina and Virginia, but we are a little more expensive than Georgia and Tennessee."

Posted by deeshore at 08:08 AM | Comments (0)

June 24, 2010

Banking principles

Banks are able to effectively create money by making loans that exceed the amount of deposits in their vaults. Some say this is a reason banks can get into trouble and put the entire economy in peril. Is this a valid criticism of banks?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"In fact we have a word for this. ... The term is called fractional reserve banking. ... It is where banks maybe will have loans that amount to, oh, just take an example of $1 million out in circulation where as they only have $100,000 back in the vault backing those loans. Really, it is an unfair criticism because effectively what the bank is doing when they make those loans (create the money) they are actually monetizing the collateral that is behind the loan.

"Say, for example, that you own a house and you have $100,000 in equity in that house. That is, the value of the house is $100,000 more than the mortgage. You want to start a small business, and you want to effectively borrow against that $100,000 equity. So you go to a bank and you get a loan for $100,000. Now actually that $100,000 hasn't been created out of thin air. What it effectively is doing is monetizing -- that is, turning your equity into cash. And so that is a very valid principle. That's a very valid reason for doing it.

"Where banks and where households, however, can get in trouble -- and we have seen this in the last couple of years -- is where the collateral doesn't maintain its value and, in fact, where the collateral goes down. And, of course, in the last two years we have seen that happen many, many times with homes, and so the banks that made those loans now don't have the same amount of collateral backing those loans. And, of course, the homeowner also loses."

Posted by deeshore at 09:41 AM | Comments (0)

June 23, 2010

Paying for government

Government spending and costs are big topics today. When most people think of paying for government programs, they think of taxes. Are there other ways government can pay for what it does?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"We want to focus here on the central government -- in our case, the federal government (the national government). And, yes, there are really three ways that any central government can pay for its projects: It can tax people; that is the traditional way. It can also borrow, and it can print money.

"Now, again, taxing is the normal way of doing it. People pay taxes on an annual basis; the government takes that money and then goes out and spends it.

"Borrowing means obviously the government goes into the credit markets and borrows that money from investors, so the investors are actually willingly providing that money to the government. The government then, over time, will pay interest and pay back that debt. Usually in countries you see borrowing go up in times of wars as well as economic emergencies like recessions.

"And then the last way -- and it is perhaps a way that people don't think about it -- is the government can simply pay for things by printing the money. Central governments have the power to print money, and we have seen that used many times over the history of countries. The downside of that, of course, is that you lower the value of the currency if you print too much of it. That is, you have inflation, and many countries have actually had their downfall when they have printed too much money to pay for the things they are doing."

Posted by deeshore at 08:52 AM | Comments (0)

June 22, 2010

Development of consumer credit

Consumers seem to have a love and hate affair with credit. We like the products that credit allows us to buy, but we don't like the interest costs. How did the idea of consumer credit get started in the first place?

"You really have to go back to the 1920s, and that decade is significant because it is when significant consumer products were developed -- tings like, obviously, the automobile -- everyone knows about that -- but also household appliances like the washing machine, radios, vacuum cleaners.

"Now before then, before those products, most of those tasks were done in the household and quite frankly they were done with either labor power or animal power. But when you had the 1920s and particularly when you had electricity, people were able to invent these items -- these things like washing machines and vacuum cleaners -- that really helped households do those tasks more efficiently and easily.

"But the sellers of those products -- to be able to buy them and, in many cases, those simple products were too expensive for folks to pay with cash, so the idea of consumer credit was born. And actually the rule -- the logical rule -- to buy those things is very simple that you -- it makes sense to use consumer credit as long as you are buying something that lasts a long time. So in essence, you are paying for it while you are using it. And that is indeed what people did in those times.

"I would argue that is still a good rule to use today when you are looking at paying for something on time. Think about now, am I buying something that lasts a long time so that I am paying for it over the period of time that I am using it?"

Posted by deeshore at 08:42 AM | Comments (0)

June 21, 2010

Voting with their feet

One indicator of the attractiveness of a region is whether people are willing to move there. When this standard is used, how did North Carolina stack up in the last decade?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"What we are looking at is the years 2000 to 2009, and the answer is we looked very well. Now this study that I am referring to looked at metropolitan regions, and what it found is that the Triangle and Charlotte were among the top 15 metropolitan regions in the country in terms of population growth. That is to say, they had a much higher rate of population growth than other metro areas.

"Also, and this is very interesting, 80 percent of the population growth for the Triangle and Charlotte came from households moving internally in the country. That is, they moved from one state -- one other metropolitan area -- to either the Triangle or to Charlotte. And this 80 percent figure was much higher than for most other metro areas.

"So I think this is a really good indication of the attractiveness of these two big metro areas in North Carolina, because if you say it is really people deciding to pick up and move, indeed they are voting with their feet."

Posted by deeshore at 09:53 AM | Comments (0)

June 18, 2010

Zero income tax

Nationwide 52 million households or 36 percent of all households who filed a federal income tax actually paid no federal income tax. Do we have any statistics that tell us just how many of these happy folks were in North Carolina?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Before I answer your question let me emphasize two things. First of all, we are referring only to the federal income tax, not all taxes. So when we say so many people don't pay federal income tax, we don't necessarily mean they are not paying other taxes.

"And secondly, these are not people who cheat. These are folks who legitimately pay no federal income tax because they had enough credits or deductions.

"Now to specifically answer your question, the latest data we have for 2008 show that 1.6 million households that filed federal income taxes in North Carolina paid no federal income taxes. And that amounts to 38 percent of all filers, so it is slightly above the 36 percent rate for the nation.

"And indeed as with many, many economic statistics, this puts North Carolina right about average, right in the middle in terms of this very interesting number."

Posted by deeshore at 10:23 AM | Comments (0)

June 17, 2010

The worst economic downturn

The recession of the last couple of years has been compared to the downturn of the 1930s, also known as the Great Depression. Now the Great Depression is the standard against which the severity of all recessions is compared. But was the Great Depression of the 1930s really the worst economy in our history?

Dr. Mike Walden, an extension economist at N.C. State University, responds:

"Of course, there are many ways to measure the effect of a depression, a recession, but in terms of length of an economic downturn ... the answer is no. And actually the longest downturn -- we will call it depression -- was the one that started in 1873. It ran for five years until 1879, and we term this now the 'Long Depression.' In contrast, our current recession probably will have lasted less than two years. And in the 1930s we really had two recessions that were not back to back -- the longest one was for 3.5 years. So the longest economic downturn -- definitely the one in the 1870s.

"Like the one that we have seen in the last couple of years, this was a worldwide depression. It sparked a lot of changes, most notably demographic. This was a period that motivated a lot of families in Europe to pick up and leave Europe and move to the U.S. I know some of my relatives did.

"So this was an economic downturn not only that was long but had a lot of lasting impacts."

Posted by deeshore at 07:12 AM | Comments (0)

June 16, 2010

Efficient markets

The widespread collapse in investment markets a few years ago, the view that smart investors can beat the average has come into question. Indeed, some investment gurus say a person shouldn't even try to beat the broader market. What is this assertion based on?

Dr. Mike Walden, a North Carolina Cooperative Extension economist at N.C. State University, responds:

"Based on the idea ... that if there are some investment opportunities out there that pay a rate of return higher than their risk level, they are not going to be left on the table for very long because they are going to be snatched up by professional investors and there is going to be nothing left for the average investor.

"In factm to use one author's description of this, it is like meat being thrown in the water where piranhas reside. That meat will be quickly devoured. And so the notion here is that investments that do better than others are going to be eaten up devoured if you will by those professional investors.

"There is actually a fancy economics term for this; it is called the efficient market hypothesis. It says that the current price of any investment, like a stock, already incorporates all the information out there about it. Especially when it filters down -- that stock filters down -- is made available to the average investor, there are no good bargains out there. The only way, this idea says, to beat the market is to be one of those piranhas."

Posted by deeshore at 10:15 AM | Comments (0)

June 15, 2010

Encouraging recycling

Common today, recycling is one of the first public efforts to reduce environmental waste. Many localities have separate public waste pick ups for the recycled items. What else can cities and counties do to promote recycling?

Dr. Mike Walden, a North Carolina Cooperative Extension economist at N.C. State University, responds:

"Well ... one set of recommendations that cities and counties do is go on and go further and give a financial incentive to recycle. You may remember -- I remember -- when I was growing up there was this 5 or 10 cent fee per bottle that you had to pay when you bought something that came in a bottle, and you would get that back when you return the bottle. So some areas have gone to that. And in fact research has found that areas that do impose such a bottle fee, people have seen an increase in recycling.

"Another step that localities can take is to require recycling. Of course, to make sure that works you have to have the enforcement to back it up so you have to have personnel to regulate, check the trash.

"And then I think a third long-run way to deal with this issue is education. And I think we are doing that -- making sure that children in particular are aware of the benefits of recycling and hope that they carry that information along with them to adulthood."

Posted by deeshore at 08:55 AM | Comments (0)

June 14, 2010

Information and calories

Some people would like to see restaurants post the calories associated with foods on their menus. In fact, New York City started requiring this in 2008. Do we have any evidence yet from New York or any other areas as to whether such calorie information has changed consumer behavior?

Dr. Mike Walden, an economist with N.C. Cooperative Extension at N.C. State University, responds:

"We do have a study -- perhaps the first now ... that is using data from New York City, which ... does require this information to be posted, and two other cities, Boston and Philadelphia, which don't. So the researcher went out and collected information on buying habits, etc., from these three areas.

"Bottomline, they found -- determined -- that the effect of posting the calorie count on foods reduced -- reduced -- calorie consumption by customers by about 6 percent. Now that may not sound like a lot, and indeed if you look at the details all of that was a reduction for calories consumed in terms of food, none for drinks. That doesn't sound like a lot, and it may be that it is going to take time for this information to sink in with people.

"Researchers do say, however, that the biggest impact of this law may not be in terms of how much fewer calories people consume now, but it may be in terms of an impetus for restaurants to offer low calorie alternatives -- therefore, their menu expands, and if people do want lower calories they have a better option.

"So perhaps too early to tell here, but at least initial results is this law has had an impact."

Posted by deeshore at 09:51 AM | Comments (0)

June 11, 2010

Reassessing property values

Most households pay property taxes either directly as homeowners or indirectly as renters. In the last couple of years property values in most localities have fallen. Has there then been a corresponding drop in property taxes?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"It depends on the property reassessment schedule. In most states and indeed including North Carolina your property -- like your home, let's say -- is not reassessed every year. In fact, in North Carolina it is done only every 8 years. Then that value is held constant until the next reassessment. So your property tax payments aren't going to change unless the rate is changed.

"And because we have had such a rollercoaster in real estate values -- up dramatically in the 2000s and, of course, down in the last two or three years -- it really depends on when the county reassessed your property in terms of whether that has been good or bad for revenues for the county.

"For example, counties that reassessed -- oh, let’s say 3 or 4 years ago at the peak of the real estate market, they have actually been lucky in terms of revenues because they assessed at a time when property values where high and sort of locked those values in for the subsequent 8 years.

"In contrast, counties that are reassessing now or reassessed in the last couple of years are going to lock in those lower values for the future.

"So this has been a real tricky thing, and it really depends on where a county has been on that 8-year cycle as to whether property values have helped or hurt their budget."

Posted by deeshore at 08:42 AM | Comments (0)

June 10, 2010

Are we becoming greener?

Saving energy has become more and more popular and is in fact a national priority. Are U.S. consumers and businesses getting the message?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"We really are. ... If you look at the amount of energy that we need -- that we use to produce a dollar of income in the U.S. -- we've actually been becoming more energy efficient now for 18 straight years. That is to say, the BTUs -- which is the typical measure of energy use -- BTUs per dollar of income is now half -- half -- of what it was in the early 1970s.

"Now certainly, we use more energy today than the early 1970s because our economy is much bigger. We have more gadgets to run. But the point is that each of those gadgets is much more efficient. And so we really have been on this movement to become greener by increasing our energy efficiency, and many think that is really the key to the future -- that if we want to become even greener the real way to do it, the best way to do it, is to become more energy efficient."

Posted by deeshore at 08:00 AM | Comments (0)

June 09, 2010

What is a market correction?

Recently there was a big drop in the stock market. Now there were many explanations given for the drop, but one I heard was that is was a typical market correction. Now what exactly is a market correction?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"That is sort of an insider's term -- insider meaning stock player term for when the market sort of pauses and it has been gaining for a while and gives back some of its gain -- sort of like it takes three steps forward, now it takes one step back.

"And it isn't necessarily the start of a down market like we saw in 2008. It's simply, well, what they say -- a correction. ... The market has perhaps grown too far, too fast. It needs to take a little breather.

"Typically -- typically, although there is no hard and fast rule on this -- a market correction is defined when the market goes down 10 to 15 percent. In the context of today's Dow Jones Industrial average, that would mean a loss of over 1,000 points.

"So I think the important thing for people to learn here is that typically we hear losses on the stock market measured in terms of points lost -- like 1,000d on the Dow. You shouldn't really get real upset about that. If again we're with a Dow over 10,000, you have a typical market correction, you are going to have a loss of 1,000 points. And again it doesn't necessarily mean that the market is going to go down for several, several months. It may simply be a pause before a new rise."

Posted by deeshore at 09:18 AM | Comments (0)

June 08, 2010

Control over money

Economic problems in Greece have grabbed the financial headlines in recent weeks. The issues there appear to be so complicated because you have not only Greece but also the European community involved. What are some lessons we can learn?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well ... the essential problem of course is that Greece can't pay its debts. We have the recession; we have a problem in Greece of collecting taxes, quite frankly, and the Greeks have voted a lot of big spending programs, so they are almost insolvent.

"They are part, however, of the greater European community. And this shows, I think, one of the potentially disadvantages of that community in that in the old days before the European community one way out for Greece would have been simply for the Greeks to print more money. Their money was called a drachma, and they could have simply printed more money to pay off their debts.

"Now this would have caused higher inflation in Greece, so the Greek people of course would have paid a cost. But it would also have made Greece more competitive because their exports would have been cheaper. But Greece can't do that now because they don't control their currency. Their ... currency, of course, is the euro; it's controlled by the European Central Bank. And so the supply of their money is not under their control.

"So in some sense this is the first problem we have seen of a country that doesn't really follow the rules of keeping their budget in balance, and yet they don't have this safety net, if you will, their money supply.

"And the European community is going to have to work this out. Because Greeks -- Greece is not the only country that has this problem. There are some others. And this may not be the only time that it happens.

"So again, I think one lesson here is the importance to a country of controlling its own currency."

Posted by deeshore at 08:57 AM | Comments (0)

June 07, 2010

The new gross domestic product

The broadest gauge of our economy, the GDP -- or gross domestic product -- was recently released for the first quarter of this year. Was it a good number?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"It was. ... It showed that GDP is increasing, and it has now increased for the third quarter in a row since last summer. This is further evidence, at least in some economists' opinion, that the recession is actually over. Others would say, 'Well, maybe not yet, but at least the recession is fading.' But nevertheless, it is good news.

"The other good thing about the latest GDP report is that it is broad based. That is to say, we saw both consumer spending and business spending increase. Particularly, businesses are now spending significantly more on technology and equipment.

"And very interestingly ... the contribution of government spending to the economy was actually negative. Now you might say, 'Well, how can that be with the government spending so much money to fight the recession?' True, the federal government is spending a lot of money to fight the recession, but that at least in this latest GDP report was more than offset by lower local and state government spending.

"So when you take all government -- federal, state and local -- spending together, it was actually negative. It had a negative impact on GDP. It is going to be very interesting to see how that fairs in coming quarters."

Posted by deeshore at 09:45 AM | Comments (0)

The new gross domestic product

The broadest gauge of our economy, the GDP -- or gross domestic product -- was recently released for the first quarter of this year. Was it a good number?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"It was. ... It showed that GDP is increasing, and it has now increased for the third quarter in a row since last summer. This is further evidence, at least in some economists' opinion, that the recession is actually over. Others would say, 'Well, maybe not yet, but at least the recession is fading.' But nevertheless, it is good news.

"The other good thing about the latest GDP report is that it is broad based. That is to say, we saw both consumer spending and business spending increase. Particularly, businesses are now spending significantly more on technology and equipment.

"And very interestingly ... the contribution of government spending to the economy was actually negative. Now you might say, 'Well, how can that be with the government spending so much money to fight the recession?' True, the federal government is spending a lot of money to fight the recession, but that at least in this latest GDP report was more than offset by lower local and state government spending.

"So when you take all government -- federal, state and local -- spending together, it was actually negative. It had a negative impact on GDP. It is going to be very interesting to see how that fairs in coming quarters."

Posted by deeshore at 09:45 AM | Comments (0)

June 04, 2010

Why are people unemployed?

This may sound like a silly question: Most people would say folks are unemployed because of the recession, so are there different categories of why people are out of work?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Yes there are. ... And how these categories stack up and how they change, I think, can give us an understanding of where the job market is going.

The current reasons for people being unemployed breaks down like this: 61 percent of people lost their job; 25 percent of people had not been previously categorized as unemployed (they had really dropped out of the labor force, but now they are back in the labor force looking for work so they are categorized as unemployed); 8 percent are new to the workforce and they haven't gotten a job yet; and then 6 percent are people who quit their job.

"Now the two biggest categories are the ones really to keep your eye on: The 61 percent losing their jobs. The 25 percent who are back in the labor force. And what has been happening here ... recently is that 25 percent has been going up. That is a bigger proportion of people who are unemployed are unemployed because they have come back into the labor force looking for work. That is actually a good sign.

"And then the 61 percent has actually been getting smaller. That is, in previous months that was a lot higher number -- much higher number. That is, businesses were greater, to a greater extent firing people, if you will. So that number has gotten smaller, so that is actually good news.

"So although we are certainly not without a job problem, in terms of the categories of reasons why people are unemployed, that has been getting better."

Posted by deeshore at 08:36 AM | Comments (0)

June 03, 2010

Financial regulation

Congress has been now debating legislation that would bring major changes to how our financial services industry operates. What's being discussed?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Three main areas ... are being discussed, and these areas have all grown out of the recession and, indeed, what led up to the recession.

"Area one is consumer protection. There is a proposal to set up a new agency. It would actually be housed in the Federal Reserve, which would have the power to review consumer financial products -- things like mortgages, small loans, et cetera, and potentially implement new regulations. So that is area one.

"Area two is setting up a structure to deal with the collapse of very large firms, which we saw during this recession. Not only banking firms but non-banking firms like General Motors and Chrysler. In this legislation would be a procedure -- a set of steps -- that the Federal Government would use to try to manage the collapse of these large firms in order to minimize the adverse risk on the economy as well as to minimize the cost of these collapses to the taxpayer.

"And then the third area is to provide some additional regulations for very sophisticated financial products like so-called derivatives, setting up new rules on trading them, on information on financial backing.

"Again, these are all proposals. They are all in a bill being discussed. My guess is some form, however, of legislation in each of these three areas will be passed."

Posted by deeshore at 08:42 AM | Comments (0)

June 02, 2010

Small business outlook

Small businesses employ almost half the workers in the country. Often small businesses are moving in a different direction than large firms, so it is important to periodically take the pulse of small companies. How is that pulse beating now?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"I think a little better ... based on the recent reports we have from small business. One measure of small business optimism was up in April from a recession low in March, but it is still well below pre-recession levels. More small businesses still, however, plan to cut their workforce rather than to expand it. But the gap between the two has narrowed. So that is a plus.

"However more small businesses say it is harder to get a loan than it was last month, although many of those small firms say that their borrowing needs have been satisfied and they are not really seeking out those loans.

"So I think we could say overall we have seen some modest -- very small, very modest -- improvement in the outlook for small businesses. But in no way shape or form should we say that small businesses are on a big boom."

Posted by deeshore at 12:44 PM | Comments (0)

June 01, 2010

Different kinds of trouble

All North Carolina counties have seen their unemployment rates rise during the recession, but even several years after the recession is over there will be many counties that will continue to see elevated unemployment rates. Why is this?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Let me try to explain this by using an analogy with a computer. Most of us use computers, and we know that we can be working on one program, let's say, on a computer but in the background another program can be running.

"Well, that is the same way with the economy. The program that we have been working on right now -- we really have been working on this -- has been the recession. That's the program that has been front and center. We do think the recession is either over or is close to being over. When that happens, though, then we focus on that program that has been running in the background. And here I talk about things like changes in North Carolina economy related to, for example, our traditional industries like the textile and apparel industry declining, other industries rising, etc. The point is we still have big economic issues both affecting the entire country and affecting individual counties. They have been somewhat overshadowed recently by the recession. But once the recession is over and we are back to economic growth, then those other issues come forward.

"So it is not a matter that, if the recession is ending, everything is fine. It is simply that that is one set of problems we can perhaps take off the table. We still have other economic problems that would then come forward."

Posted by deeshore at 10:14 AM | Comments (0)