|
2009 to still be painful
Jan 04, 2009 (The Times-Tribune - McClatchy-Tribune Information Services via COMTEX) --
Even the most optimistic observers hope that by the end of 2009, the economy will hit bottom and start to rebound -- the beginning of the end.
But considering climbing unemployment and foreclosures, declining spending and home values, most agree the economic situation will get worse before it gets better, saying that most of 2009 would be painful as the region and the nation move through a prolonged recession.
Anthony Liuzzo, Ph.D., business and economics professor at Wilkes University, said things will be bad, with mounting layoffs, more unemployment, tighter credit, and climbing personal and business bankruptcies.
"We may not be in as bad shape as some, and we have not felt the pain of the housing bubble that the coastal areas have, but that doesn't mean the recession is passing us," Dr. Liuzzo said. "I can say with absolute certainty things will not be good, and the recession will continue for two or three quarters."
Home prices
Northeast Pennsylvania may also face the brunt of the decline in home prices and values.
Austin Jaffe, Ph.D., director of the Institute for Real Estate Studies at Penn State University, said while real estate values in the state's metro areas, such as Scranton/Wilkes-Barre, remained stable through much of 2008, a decline had begun by year's end. In 2009, prices will slip further during the first two quarters, he predicted.
A number of forces are at play. Foreclosures, while modest compared to the rest of the nation, are rising, he said, putting more homes on the market, adding to an oversupply and further depressing values. In November, Pennsylvania saw 54 percent more foreclosures than November 2007. Rising unemployment will increase foreclosures even further.
"The original wave of foreclosures was due to subprime loans and resetting adjustable-rate mortgages," Dr. Jaffe said. "The coming wave will be from people who lose their jobs and can't pay their mortgage. This double whammy will create very weak conditions."
That's just part of the real estate pain. Dr. Jaffe said commercial real estate is showing signs of weakness and will be the next to take a hit.
Bright side
Some sectors of the economy do well in down economies -- "negatively correlated," as economists say. Those include education and health care, both major sectors in Northeast Pennsylvania. Dr. Liuzzo is the director the Wilkes University MBA program, which has seen an increase in applications. Typically, applicants are worried professionals who want to be more versatile employees and cut their chance of being a victim of job cuts. The unemployed often go back to school to sharpen or change skills.
But as the economy worsens in 2009, Northeast Pennsylvania's growth sectors -- public education, government, and health care ?-- will level off or even decline, said Dr. Satyajit Ghosh, professor of economics and finance at the University of Scranton, as government and health care providers grapple with declining revenue.
Another positive may be the absence of inflation. Falling prices may have given relief to consumers but could cause serious problems if it leads to deflation, Dr. Ghosh said.
"We may have to create a new word, something like 'stag-deflation,' " he said, alluding to the 70s portmanteau "stagflation," which refers to periods of economic stagnation and price inflation.
There may be more economic activity out there than many suspect. Chuck Leonard, president of Pocono Mountains Economic Development Corp., does not have as bleak an outlook. He said despite the torrent of bad news, his organization continues to receive nibbles of interest and even visits from companies looking to expand but taking a "wait-and-see" position before they move.
"There's been a drop-off, but our lead activity is not as weak as you would think," he said. "There is a pent-up demand, and I hope that when things swing back in 2009, that demand will break out."
Some firms are capitalizing on the collapse of their competitors, Mr. Leonards said, expanding to fill market gaps left by casualties of the economy.
Emergence
Experts are guardedly optimistic about things improving later in the year, but all fear the recession could easily persist.
Like Dr. Liuzzo, Dr. Jaffe also believes the worse will be behind in the second half of 2009, which he described as possible "the beginning of the end" of the recession.
Contact the writer: dfalchek@timesshamrock.com
To see more of The Times-Tribune or to subscribe to the newspaper, go to
http://www.thetimes-tribune.com/. Copyright (c) 2009, The Times-Tribune,
Scranton, Pa. Distributed by McClatchy-Tribune Information Services. For
reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or
847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group
Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
[ Back To TMCnet.com's Homepage ]
|
INDUSTRIES
Activate Email 
INDUSTRIES
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 1-3, 2009. Los Angeles, CA.
