Note: This is part 2 of a 2 part series looking back at the economics of 2011 and looking projecting the economics of 2012. Part 1 can be found here.
During the next 11 months, we will hear a lot about the economy from the various people running for public office, especially at the national level. Regardless of your politics, I feel like everyone can agree that the economy has seen better days. Here is what I think the economy will be doing over the next 12 months. I am not by any mean the Oracle at Delphi, but this is my opinion based on a lot of reading and research by experts in their areas of expertise. Here are some areas of interest, including some not specifically discussed in Part 1.
Many are predicting a growth rate of about 2% to 3%, consistent with 2011. Goldman Sachs is actually forecasting quarterly growth at anywhere from near 0% to less than 2% due to fiscal tightening and stress in European markets. However, they believe that household income and cyclical sectors, like housing, coming back.
According to 600 executives at U.S. companies who were surveyed in the latest Bank of America/Merrill Lynch CFO Outlook Survey and highlighted in a recent Triangle Business Journal article, only 38% expected the economy to expand in 2012, down from 56 percent in last year’s survey and 66 percent the previous year.
I will have to admit full disclosure. This is the area I am least educated about. Even for a numbers guy, the market can be confusing if not followed constantly. So based on that, it looks like, generally, the market will continue its volatility, even continuing the trend of 3% to 4% swings on any given day. Many are expecting a drop during the first quarter, a spring gain that turns into a summer slump. The year is projected to end on a rise, similar to 2011. All of this hinges on the ongoing national debt issues and the European crisis. According to the Wall Street professionals assembled by Barron’s, the market is going to increase by 11.5%. However, that seems to be the same number over the past 2 years.
Employment & Unemployment
At any given local area, it is difficult to determine what will happen, but hopefully the national trends with provide some insight to what might happen as you couple it with what is specifically going on with new job announcements and layoffs.
Based on the Blue Chip Consensus Survey, many are seeing an unemployment rate of less than 9%. A recent Goldman Sachs is seeing this increase over the next year. Others, including the White House, are saying anywhere from 8% to 9%, as seen in the video here.
Despite those concerns noted in the Bank of America/Merrill Lynch CFO Outlook Survey, most CFOs don’t expect their companies to reduce work forces in 2012. Only 7 % predicted layoffs, as compared with 6% last year. Meanwhile, 48% of executives surveyed expect their companies to stay the same size and another 46% said they expect to hire employees. These percentages are similar to last year’s survey.
A good sign is that much of the hiring seem to be from small businesses, which are historically the drivers of employment growth and market recovery.
“Housing has to come back at some point.” I know many people, including myself, say this. Unfortunately, we all have been saying it for a while, too. There are some signs that housing might be coming back in 2012. We have seen builder optimism increase for several months in a row and the US Census Bureau announced that November was the sixth consecutive month of gains in new single-family construction spending.
Triangle Region & NC Economy
Generally, there is limited optimism in many of the 2012 economic forecast, according to research done by WRAL. Recently, Appalachian State University economics professor Harry Davis predicted the economy would grow at 2.25 to 2.5 percent in 2012. He also noted that residential housing growth is only around 6%, as compared to 26% in previous economic recoveries. Also, Dr. John Silvia, chief economist at Wells Fargo noted that housing prices in Raleigh are near the bottom at the Raleigh Chamber of Commerce 2012 Economic Forecast.
However, growth is a positive for the Triangle area. Silvia noted that Raleigh is #1 in terms of growth and employment in the state of NC. However, Anthony Wilson of ABC 11, WTVD noted that “Raleigh has persistent long-term unemployment, and companies can’t find trained workers.” Davis believes that unemployment will drop from the current 10% to 9.3%, still well above the national figure. However, some are very bullish on the 2012 NC employment situation. NC State Economics Professor Mike Walden is “predicting we’ll see 40,000 to 50,000 jobs created in North Carolina in 2012,” said Walden. “Compared to the 20,000 created in 2011.” This is a drop of the unemployment rate to less than 9% this year.
However, the issues that continues to worry people is the fact that the US debt will be greater than the US GDP. If a business had more debt than it brings in, it would not be able to survive year after year. Many are optimistic about an economic growth during 2012, but risks remain. High unemployment, easing of imports, uncertainty of the housing market, the European economies and markets are all risk factors that could complicate 2012.
Lastly, the Presidential Election is going to be a contributing risk. Regardless of your political ideology, conservative or liberal, Democrat or Republican, there is a lot at stake beyond which Party is in the Oval Office come January 2013. The entire House is up and 1/3 of the Senate. Whoever controls these will be able to affect business and the economy for the next 4 years (if not longer). I feel this will inhibit any major politically related economic issues. No one wants to be on the wrong side and not win their election on November 6, 2012.
Just a note: Everything above is a compilation of information I have researched and my own opinions. I did resource other articles and websites not specifically mentioned above that I want to give credit. Here are the additional resources for your reference.
What do you think the 2012 economy will be for the US as well as the NC areas? Do you have contingency plans if it is better/worse than you expected?
–J. Nolfo helps companies understand their market and customers though a variety of market research strategies. He has over ten years of experience of market research for strategic planning purposes. He is the Director of Research at Rhino Market Research. He shares his thoughts about market research and business concepts with his blog “Pensare…Understanding Market Research in Business“. If you would like to discuss this blog or how J. can help you understand your market and customer needs, email him at firstname.lastname@example.org.