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Forecasters Predict Good News for SC Economy
January 17, 2012
Though the economic recovery remains fragile, there is good news for South Carolina, according to economists at the 31st Annual Economic Outlook Conference sponsored by the Darla Moore School of Business. The conference has grown over the years into the state’s premier gathering of economists, policy makers, bankers, investors, business executives and community leaders. John Silvia, Ph.D., a managing director and chief economist for Wells Fargo, was this year’s keynote speaker.
John Silvia, Ph.D.: Global Firms Leading Recovery
Silvia directed his comments at business leaders who want to make good decisions. “There are five benchmarks for good decision-making,” he said. “Inflation, profits, growth, investments and the dollar. Bad decisions come from not taking all of these factors into consideration.”
He reported that the economy remains fragile because of continued below-characteristic economic growth. “There is no double-dip, but we didn’t have the kind of economic recovery we are familiar with,” he said. He believes that this period in history will be called the Great Recession.
With the U.S. economy growing at only two percent, he reported that small businesses continue to struggle while businesses with a global reach are participating in the recovery, some at rates that are their highest since 1982.
Silvia forecasts that the U.S. economy will grow at a two-to-three percent rate in the coming year, and sees the country’s exposure to a European recession as minimal. He recommended that individual investors fully investigate how much exposure they have before investing in European banks. For instance, French banks are 20-30 percent tied to Italy, while Portugal holds a massive quantity of Greek debt.
When asked if the Federal Reserve’s policies were like lending yourself money, he replied, “No, it’s like loaning money to your brother who has never paid you back.”
Joseph Von Nessen, Ph.D.: Continued but Slow Growth
Moore School researcher Joseph Von Nessen, Ph.D., looked at prospects for South Carolina in the coming years. Using a “naïve forecast,” which is a prediction of the future based on past performance without any adjustments, Von Nessen said that with a growth rate of one percent it would take us until 2018 to get back to pre-recession levels. Using the current growth rate of two percent, we can expect to achieve pre-recession levels in 2014-2015. If the growth rate increases to three percent, our economy will go back to pre-recession levels in late 2013-2014. While these numbers are troubling, perhaps they should best be viewed in terms of how much we have lost in this recession.
He reported that S.C. is doing better than the nation in new housing starts, and that first-time and move-up house prices are stabilizing. He anticipates continued growth in 2012, and expects the strongest job growth in manufacturing, professional services and health care.
Douglas P. Woodward, Ph.D.: S.C. Leading Nation in Leading Indicators
Douglas P. Woodward, Ph.D., director of the Division of Research and professor of economics at the Moore School, told the audience that though we should worry because of the weak global economy and the possibility of financial contagion, there is much for South Carolinians to be happy about. The state’s economy is healing, some sectors are even robust, and there are hot areas that are the envy of other states.
Woodward announced that a new report out from the Federal Reserve Bank of Philadelphia shows that South Carolina and Michigan are leading in the U.S. in leading indicators right now. Woodward also reported that the United States is ranked fourth in the world for providing the best environment to start a business, and that South Carolina is ranked fourth in the U.S. as a great place to do business. “We’re the fourth best state in the fourth best country,” he said. “We’re doing extremely well.”
Woodward said that the U.S. productivity, measured in output per worker, is what determines long-term competitiveness, and is holding up very well. “We have a highly productive economy,” he said. “Better than Europe and to some extent, better than some parts of Asia.”
The coastal areas, the Midlands and the Upstate are outperforming the nation in job growth. Additionally, Charleston had the largest increase in its share of adults with college degrees—a favorable statistic not only because this group has the highest level of employment, but also because they are the least likely to use social services.
Robert H. Hitt III: South Carolina Will Be Largest Tire-Producer in U.S.
S.C. Secretary of Commerce Bobby Hitt gave a vision for the future of South Carolina that builds on the state’s past. “Manufacturing is taking hold again in South Carolina,” Hitt said. “The state has a great tradition.” However, for 13 years the state saw a decline in manufacturing jobs because of losses in the textile industry.
“What we need to remember is that we don’t lose industries unless the life cycle of the industry changes and the industry goes away. That is critical to how we need to think about ourselves and our state,” he continued. “In 2010, we had the first growth in manufacturing payrolls in 13 years. We hit bottom and we’re on the way up. Manufacturing is what we’re good at.”
Hitt reported that South Carolina is leading the Southeast in manufacturing job growth. “While 17 percent of the state’s output is in manufacturing, only 10 percent of our workforce works in manufacturing,” he said. “It needs to be higher."
Hitt named the 85 businesses that announced that they were coming to S.C. this year, for a total investment of $3.9 billion in new manufacturing.
“Manufacturing is wealth creation,” he said. “We’ve got BMW as one bookend in the upstate, Boeing as one bookend on the coast, and we’re going to fill the middle of the state with tires—Bridgestone, Michelin and Continental.
“Within a few years, South Carolina will be the largest tire producing state in the U.S. by a large margin. We are a big player in the tire market, and we need academic development in logistics. We’re going to be shipping tires around the world,” he said. “I’m tired of hearing about [other universities’] logistics programs. Our research universities need to invest in logistics. We may be able to have endowed chairs.”
“We have great in-migration into the state of people looking for jobs,” he said. “If our state’s people were trained for the open positions we have here, we’d have no unemployment.”
Dean Hildy J. Teegen, Ph.D.: SCDASH.com Offers Free, Reliable Data
Moore School Dean Hildy Teegen announced the launch of SCDASH.com, a new economic informational resource that is free to all. Teegen said, “We wanted to provide a public service to further economic development and to give decision makers the information they need.”
SC Dash is a clearinghouse for economic data about South Carolina. It was created by the Moore School, with help from Cyberwoven and IT-ology. Users can create custom searches to find and compare South Carolina statistical data within a variety of categories, geographical areas and from a multitude of sources.
“It’s a one-stop shop for all S.C. data, coming from a wide range of data sources, both federal and state,” she said. Data is the most current and reliable available. “We welcome data that you have and want to contribute, and welcome links from your websites.”
From the SCDash.com website there is also a blog on S.C. trends. Contributions and comments are welcome. To find out more, visit www.scdash.com.
Written by Anne Creed
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