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RAY SUAREZ: A year ago, as 2001 began, the nation’s unemployment rate stood at 4.2 percent. Today, that number rose to 5.8 percent.
During all of last year, some 2.6 million Americans lost their job.
To put those numbers in some historical perspective, over the last decade, the jobless number hit a high of 7.8 percent in 1992 and, more recently, a low of 3.9 percent in April, 2000, but the recent news has not been all bad.
There were strong signs of a manufacturing rebound this week, home sales remain brisk, and the closely watched Consumer Confidence Index had its biggest point gain in December since February 1998.
Here to help us understand the numbers and the current health of the economy are mark Vitner, vice president and senior economist at Wachovia Securities, a consumer bank and brokerage based on the East Coast; Diane Swonk, chief economist at Bank One Corporation in Chicago; and William Conerly, an economist and principal of Conerly Consulting, an economic consulting firm based in Portland, Oregon.
Well, I’d like to go around the country and get first a look at the numbers overall what the national numbers are telling you and then break it down by your own regions. Mark Vitner.
MARK VITNER, Wachovia Securities: Yes, here in the, along the East Coast, the recession has hit pretty hard.
If you look at the national numbers, we’ve lost about a million 40,000 private sector jobs over the last three months. About 40 percent to 50 percent of that loss has been in manufacturing, 25 percent has been in tourism. And the remainder has been a mixture of retailing and other services, a lot of it being in temporary help. Well, if you look at those components, a lot of the components are important to the economies along the East Coast.
Manufacturing in particular is very important to the Southeast. And we have a lot of very labor-intensive operations, such as textiles, apparel, furniture manufacturing, and they’ve all lost in excess of 10 percent of their employment base in the last year. And then of course the weakness in tourism really hit the Florida economy hard. And that was one of the economies along the East Coast that was holding up really, really well.
RAY SUAREZ: And William Conerly, first the national scene as you look at the numbers and then break it out for your region.
WILLIAM CONERLY, Conerly Consulting: Well, all of the news has been gloomy the last few months, but reading the tea leaves, I don’t think this is going to be quite as bad a recession as it may feel in the gut.
I think there’s a turnaround coming in the next couple of months, and it’s not going to be a miserable doom and gloom time for the next year. Here in the West Coast, the good news is in southern California where they’re seeing a little bit of the recession, but they’re not feeling it really badly, however, as you start to move North, things are really in trouble. Silicon Valley has been hard hit with the technology decline, and then Oregon, which has shifted its economy from wood products into high technology; Oregon is paying the price for having high technology now with the highest unemployment rate in the country and the biggest increase in the unemployment rate over the last 12 months.
Farther North, in Washington state, is number two in unemployment, has also seen a significant increase. But when you get into the mountain states like Idaho and Montana, not much change.
RAY SUAREZ: And, finally, Diane Swonk.
DIANE SWONK, Bank One: Well, the overall economic outlook I think is fairly bullish going forward. We have a couple lumpy months to go through as we give back some of the auto sales that were sold on 0 percent financing — went to record sales.
Whenever we have a recession, we have record home sales and record vehicle sales in the midst of it — just doesn’t happen – and here I am in the heart of the industrial Midwest, the heart of auto manufacturing territory and one of the things we’re finding here is vehicle production is actually on the upswing again.
In the first quarter vehicle production is picking up. Even now we know sales are going to fall off the cliff. This is very important. It’s because inventories are so bone dry, we actually are getting a bounce back in production. We finally overshot on inventories. We probably had the largest drain in inventories of the post-World War II era in the fourth quarter, and that’s just music to an economist’s ears, because it means no matter what, you’ve got to replenish those bare cupboards out there.
Also, interestingly, in the middle of the Midwest, it’s been extremely mild, unusually mild winter weather. It was warmer in Chicago in early December than it was in Phoenix on a trip I made, and that had a real effect on grounding snowbirds. In addition to 9/11 the tourism business has been hurt, and all those snowbirds that tend to fly South for the summer – or South for the winter are not flying South. They’re staying closer to home, they’re driving in their brand-new cars, buying large screen TVs, and spending more in neighborhood shops.
In fact, Michigan Avenue, which is a real destination in the industrial Midwest for shopping, did unexpectedly well during the holiday season despite the fact that Chicago is a convention center that got hit of course by the loss in convention business after Sept. 11. So we’ve actually seen some offsets.
Our unemployment rate, which should be usually at this stage of the game much higher than the national average, is actually below the national average. We’ve lost more manufacturing jobs in Illinois than any other state, yet we’re weathering the situation extremely well. And part of that is because of the weather.
The other part is we’ve got a record number of manufacturing workers retiring out, and with the golden handshakes the UAW gave them in their last round of negotiations with the big three automakers, it is a much more kinder and gentler form of downsizing than we’ve seen in the past.
RAY SUAREZ: During the last big recovery it was said that California was the last to the table to enjoy the run-up in jobs. Could the Midwest just be out of cycle?
DIANE SWONK: Actually, the Midwest was the recovery Phoenix story of the 1990s. The Midwest was the fastest growing region during the bulk of the 1990s, and as a result had lower unemployment rates than most regions in the country by the end of the 1990s and beginning of this economic slowdown. That acted as a real shock absorber even as the unemployment rate was risings in this region, which really put us out of sync.
The 1991 recession was different for us than most had been in the past because exports kept us afloat. This time around, the fact that we already had such good economic times helped to cushion the blow once economic times slowed.
RAY SUAREZ: Mark Vitner, there is a lot of diversity in the economy of roughly eastern Time in the United States. Did that diversification help keep this from being an even worse job loss period, or did it just mean that a more interesting array of people were losing their jobs?
MIKE VITNER: Well, there are parts of the East Coast that are doing exceptionally well. The Washington, DC area, the Baltimore area, even Philadelphia and southern New Jersey are holding up exceptionally well.
But, New York City has lost more jobs than any other metro area in the country. And Atlanta is number two. And that is a huge reversal for both of those markets. They had been very, very strong throughout the 1990s. In fact, Atlanta added more jobs than any other metro area in the country. And now they’re sitting there with the second biggest loss.
The big turnaround was primarily high-tech, something you would associate with the West Coast. But on the East Coast, both New York and Atlanta really saw a huge boom in the technology sector and in the telecom sector. Telecom employment accounts for twice as large a share of Atlanta’s work force as it does with the nation’s, and while it’s relatively tiny, there have been some huge layoffs there.
RAY SUAREZ: Are we still seeing fallout from the terrorist attacks of the fall; particularly in the New York metropolitan area?
MIKE VITNER: We certainly are. I know that tourism has come back and it’s really hard to gauge how much it’s come back in New York from where it was years ago, but we know that spending has not gotten back to the level that we had previously.
And really all along the East Coast, and for the country for that matter, we haven’t regained the pre-Sept. 11 levels. We think that we will in the first– sometime in the first quarter, that we’ll come back off the bottom and be in the recovery but there is still a world of difference in New York and New Jersey between now and just prior to Sept. 11 when it looked like that part of the country would miss the recession.
RAY SUAREZ: William Conerly, we talk about unemployment as a lagging indicator all the time. But are there things that you can see in current numbers that give you some hope — the fact that the average work week got a little longer — the fact that the average waging rose a little bit? Does that give you any sign of what’s coming down the road?
WILLIAM CONERLY: Yeah, there are some positive signs, as Diane was saying, the low level of inventories is very positive.
Out in the Northwest, actually in the whole country, if you have got high-tech, you’re in trouble because this was a high-tech recession. If you have consumer goods like the upper Midwest, things aren’t so bad.
So we’re looking for signs of a rebound in technology, and we’re actually starting to get it even though we just had one semiconductor plant announce a shutdown here recently. We’re seeing signs of the semiconductor industry coming back.
They’re reporting their orders are a little bit better, and if the technology industries will come back moderately, they don’t have to come back like the big boom of, you know, two years ago but if they’ll come back moderately, then those areas that have been so hard hit are going to rebound, and then we get the diffusion effect where the dollars spread through the whole economy.
RAY SUAREZ: Well, during the 1990s, it was often said the West Coast bore the brunt of the transition to a post-Cold War economy because of the contraction of the military.
We’re at war now. Does government spending on the military, on acquiring material, paying soldiers salaries, does that give a disproportionate shot in the arm to the West?
WILLIAM CONERLY: To some parts of the West. The Los Angeles area is going to benefit from some defense spending. Washington state has a lot of bases and they’re gearing up activity.
But Oregon and northern California are not going to see a lot of benefit. There will be some. There are some businesses that are selling security devices, but generally you have to look more community-by-community to understand the impact of the defense buildup rather than painting with a broad brush across the whole region.
RAY SUAREZ: Diane Swonk, when we talk about some place as vast as the Midwest and with so many people in it, can we overlook some real bright spots or in the case of the Midwest where you painted a pretty good picture, some real employment black spots places that both didn’t enjoy the recovery of the 1990s and are likely to get it in the chops during this downturn?
DIANE SWONK: We certainly saw Gary, Indiana, was sort of one of the last ones to enjoy a resurgence in the Midwest. It’s not very far from Chicago here.
And the steel industry, let’s face it, is not, even with record years of steel consumption in our history, the last couple years the steel industry has been hit hard by imports. And they show they’re gaining the U.S. economy.
The steel industry is working hard for protectionism, working trying toe get anti-dumping standards out there but this is a very difficult thing to do when much of the steel that we’re seeing coming into the country now is coming in from former Eastern Bloc Soviet Union countries where the price of trying to calculate how much it costs to produce that steel is very difficult. So it is hard to argue they’re actually dumping. So this has been the one spot that certainly is the Achilles heel of the steel industry and in the industrial Midwest.
Ironically, in one of the states, with one of the lowest unemployment rates in the industrial Midwest – and that is Indiana. Indiana is a very interesting state in that it has a lot of production, some of the highest investment in Japanese transplants in the Midwest are in Indiana, the state of Indiana.
At the same time – and those plants are ramping up on production — at the same time it has been hit hard by the steel industry and continues to be hit hard by what’s going on in the steel industry. The good news is not that many people work in the steel industry anymore so it is not showing up in the aggregate numbers as it once did.
RAY SUAREZ: Mark Vitner, you yourself in your remark talked a lot about the big metropolitan areas, places like Atlanta and New York — are they having a particularly tough time in non-metropolitan areas, places like rural New England, the Adirondacks, away from the coast and the Southeast?
MIKE VITNER: Well, there’s actually a smaller metro area just a little ways from Charlotte, Hickory, North Carolina, which has seen the second largest increase in the unemployment rate of any area in the country.
A year ago the unemployment rate there was just 2.1 percent. Now it’s 7.9 percent. And what has happened there is they have just been hit very hard by layoffs in the furniture industry, the textile industry and fiber-optic industry, what they hoped would be the industry of the future for them and still may be, really crushed them this past year — about 60 percent of the world’s fiber-optic cable is made within 100 miles of Hickory.
Now recently we have seen some positive developments there. Corning announced today that they will be reopening a plant, one of their larger fiber-optic cable plants in about two weeks. It’s one of the first bright signs that we’ve seen in that industry for sometime.
RAY SUAREZ: Mark Vitner, Diane Swonk, William Conerly, thank you all.