Economist: Consumers key to recovery
Most forecasts don’t see repeat of Depression
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Since the Great Depression, consumer spending has risen during every recession but one during 1975-76, and it’s that link with the consumer that will determine how severe the U.S. economic downturn will be, LSU economist Jim Richardson said Wednesday.
Richardson, speaking to a business conference in Ascension Parish, also said the tax plans of presidential candidates Barack Obama and John McCain weren’t substantially different — except on capital gains and the top personal income tax rate — and it will be essential for President-elect Obama to hold the line on raising taxes until the economy improves.
“If consumption keeps rising, the recession is going to be short-lived,” Richardson said, pointing to forecasts of minus-1.5 percent as the worst quarterly growth rate expected for the U.S. economy going through mid-2009. Last quarter, the economy shrank one-third of 1 percent.
Consumers generate two-thirds of economic output in the U.S., and how they respond to the procession of financial bailouts — $85 billion for a controlling Federal Reserve stake in AIG Inc., a $700 billion bailout plan passed by Congress, including $250 billion in loaned funds to buoy large banks — will be critical as well, Richardson said.
“Most forecasts do not see a repeat of the Great Depression. We have a lot more insulators than we had during the Great Depression,” Richardson said, adding later that consumer confidence in the U.S. financial system is pivotal going into the holiday shopping season.
“The financial system is like church,” Richardson said. “You have to believe in it. If we all went to the bank the same day and demanded every dollar we had in it, you know what would happen? They’d have to send us away.”
The Federal Reserve will work to stay in front of the financial crisis for reasons that are obvious in the Ascension Parish economy, he said. Every major automaker experienced a sales slump of 20 percent or more in October. And if sales continue to remain low, automakers will begin spending less on plastics and that would hit home in Ascension Parish, where chemical manufacturing is dominant.
Ascension Parish is more diversified and therefore somewhat better insulated from downturns in durable goods manufacturing than it was in 2000, Richardson said.
Then, construction and manufacturing made up 40 percent of all Ascension jobs. Today, those sectors make up 27 percent of jobs, with the financial and service sectors picking up a greater share of jobs, he said.
How strongly such retail locations at Tanger Outlets and Cabela’s perform the weekend after Thanksgiving — and how well their retail counterparts across the nation do — will offer the next big view of the recession.
“If people don’t spend, that will tell us it may be a little rockier than we think,” Richardson said.
Earlier, Skip Bertman, the LSU athletics director emeritus, delivered a motivational talk; LSU management professor Courtland Chaney talked about managing performance; GoodPeople principal Craig Sweeney discussed hiring strategies; and Object 9 principal Jon Cato explored brand and Internet marketing strategies.
The conference, “Growing Your Business in the New Ascension,” was sponsored by Eatel, The SunShine Pages, LSU Continuing Education and the Ascension Chamber of Commerce.
Richardson, speaking to a business conference in Ascension Parish, also said the tax plans of presidential candidates Barack Obama and John McCain weren’t substantially different — except on capital gains and the top personal income tax rate — and it will be essential for President-elect Obama to hold the line on raising taxes until the economy improves.
“If consumption keeps rising, the recession is going to be short-lived,” Richardson said, pointing to forecasts of minus-1.5 percent as the worst quarterly growth rate expected for the U.S. economy going through mid-2009. Last quarter, the economy shrank one-third of 1 percent.
Consumers generate two-thirds of economic output in the U.S., and how they respond to the procession of financial bailouts — $85 billion for a controlling Federal Reserve stake in AIG Inc., a $700 billion bailout plan passed by Congress, including $250 billion in loaned funds to buoy large banks — will be critical as well, Richardson said.
“Most forecasts do not see a repeat of the Great Depression. We have a lot more insulators than we had during the Great Depression,” Richardson said, adding later that consumer confidence in the U.S. financial system is pivotal going into the holiday shopping season.
“The financial system is like church,” Richardson said. “You have to believe in it. If we all went to the bank the same day and demanded every dollar we had in it, you know what would happen? They’d have to send us away.”
The Federal Reserve will work to stay in front of the financial crisis for reasons that are obvious in the Ascension Parish economy, he said. Every major automaker experienced a sales slump of 20 percent or more in October. And if sales continue to remain low, automakers will begin spending less on plastics and that would hit home in Ascension Parish, where chemical manufacturing is dominant.
Ascension Parish is more diversified and therefore somewhat better insulated from downturns in durable goods manufacturing than it was in 2000, Richardson said.
Then, construction and manufacturing made up 40 percent of all Ascension jobs. Today, those sectors make up 27 percent of jobs, with the financial and service sectors picking up a greater share of jobs, he said.
How strongly such retail locations at Tanger Outlets and Cabela’s perform the weekend after Thanksgiving — and how well their retail counterparts across the nation do — will offer the next big view of the recession.
“If people don’t spend, that will tell us it may be a little rockier than we think,” Richardson said.
Earlier, Skip Bertman, the LSU athletics director emeritus, delivered a motivational talk; LSU management professor Courtland Chaney talked about managing performance; GoodPeople principal Craig Sweeney discussed hiring strategies; and Object 9 principal Jon Cato explored brand and Internet marketing strategies.
The conference, “Growing Your Business in the New Ascension,” was sponsored by Eatel, The SunShine Pages, LSU Continuing Education and the Ascension Chamber of Commerce.
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