Delaware fully recovered from recession, economist says
Economist Anirban Basu said that in a “shockingly weak” global market, the United States is holding its own. He also believes the strength of the strong consumer market will hold off a recession – at least in 2016.
A highlight closer to home? Moody’s analytics shows that Delaware has fully recovered from the great recession, said Basu.
The Maryland-based economist and policy consultant was the featured speaker at the New Castle County Chamber of Commerce’s 9th Annual Economic Forecast Luncheon attended by more than 260 business leaders and legislators. His economic forecast – delivered with a mix of humor and self-deprecation – has been a centerpiece of the event every year.
Basu said that personal consumption is the biggest contributor to the more than 2 percent economic growth of the United States in 2015. Drawing a football metaphor, he likened the economy to the Washington Redskins – not that strong, but the best in its division.
“The economic outlook is much more complicated than it’s been in recent years,” said Basu, chairman and CEO of Sage Policy Group, Inc., an economic and policy consulting firm based in Baltimore, Md. “The world is simply not growing enough.”
Compared to countries like Brazil, which saw its currency decrease by 33 percent last year, or Russia, where the ruble declined by 20 percent compared to the U.S. dollar, the United States continues to set the standard. He pointed to the decline in demand for globally utilized economies like oil and raw materials as indicators of a weakened economy.
U.S economic growth has accelerated because of consumer spending, said Basu. Another hallmark of the economic recovery is an increase in employment figures, with 151,000 jobs added in January alone. Education and health services experienced the biggest increase in job growth in 2015, followed by professional and business services, and the leisure and hospitality industries.
“Some say the recession will begin this year,” said Basu. “But I think the consumer market is strong enough and job growth is strong enough to support us through 2016.”
Basu noted that corporate profit margins are slipping and interest rates are on the rise. He said only the consumer is really contributing significantly to growth, while state and local government spending play only a supporting role.
Other highlights included:
- Auto dealers in the US sold 1.75 million cars last year with an average transaction of $34,000.
- Americans spend their money most frequently at full-service restaurants.
- Mining and logging industries are the big losers on the job front.
In 2015, Delaware employment increased by 1.7 percent, according to Basu.
With young college graduates the most likely generation to relocate, Basu said that cities across the country are seeing the greatest influx of millennials to their markets, and suggested that Wilmington will be a draw if it can meet that demographic with an ample selection of restaurants and bars.
He also predicted two interest rate increases this year and said the second half of the year won’t be as good as the first.
“We may be transitioning very quickly from the mid-cycle stage of the recovery to the late-stage,” said Basu. “The 2017 outlook is very murky.”
Basu said the consumer-led recovery stops at housing ownership, now at just 63.7 percent. Basu said first-time homebuyers, buried by student debt and a culture less focused on asset accumulation, have affected the economic outcomes of the housing market. Millennials are opting to rent instead of buy.
“But it will come back with a vengeance,” noted Basu. “Once people have children, they look like everybody else.”
The NCCC event was held at the Chase Center on the Riverfront.