The National Bureau of Economic Research confirmed last week what a lot of folks had known for a while: The U.S. economy is in a recession.
Economists with the NBER said the nation’s economy hit a peak in December 2007 and has tilted downward since. At nearly a year, the latest recession is the longest since World War II.
Mississippi state economist Dr. Phil Pepper told members of a legislative budget committee last month that, even though nothing official had been declared, the symptoms of a recession were obvious – consecutive quarters of economic shrinkage, job loss and falling consumer spending among the most noticeable.
If the last couple of months are any indication of how Mississippi will weather the bad economy, the state can expect continued job loss in the manufacturing sector – Northeast Mississippi alone has lost 2,000 manufacturing jobs this year – and declining tax revenues.
Already, state budget officials have lowered the revenue estimate for fiscal year 2009, which started July 1, and Gov. Haley Barbour has said the current budget might have to be slashed again before FY2010 starts July 1, 2009.
A faltering manufacturing sector is what drove the last recession, in 2000 and 2001.
“Mississippi was hit harder than most other states (eight years ago),” Pepper said. “Most everybody recovered in about a year, but we went seven years there before we got to our (year) 2000 level of employment primarily because, in Mississippi, a large part of the recession was driven by the loss of manufacturing jobs.”
The current economic woes have manifested themselves nationwide with the collapse of major financial institutions that prompted Congress to pass and President Bush to sign a bailout package whose price started at $700 billion but has since reached into the trillions.
In the Southeast, the effects have ranged from hiring freezes at state agencies to payments designated for public school systems being delayed.
In Tennessee, Gov. Phil Bredesen has ordered state agencies twice to cut their current fiscal year budgets. That state is expecting an $800 million revenue shortfall. Bredesen late last month ordered a 10 to 15 percent cut in spending. That came after a 3 percent reduction earlier this year. Heads of the Tennessee departments of education, corrections and agriculture told the Associated Press layoffs at their agencies are all but assured.
Public school systems in Alabama did not receive scheduled $84 million payments in October and November because that state’s Education Trust Fund did not have enough money in it. Because Alabama earmarks 80 percent of its tax revenue, money that goes toward highways and bridges cannot be spent on education. State law prohibits interfund borrowing. Such delays in funding can force school districts to dip into reserves or borrow from banks.
First-term Republican Louisiana Gov. Bobby Jindal, who a lot of political analysts believe would make a strong presidential candidate in 2012, has already implemented hiring freezes at state agencies twice this year. Louisiana’s FY10 budget, which will hit the books July 1, is already facing a $1.3 billion shortfall. Although no cuts have yet been made to state agencies, Jindal has warned department heads to expect them.
Similar to Mississippi, Arkansas has struggled with a job drain in the manufacturing sector, with unemployment rates rising steadily since August. According to the Bureau of Labor Statistics, more than 1,800 jobs disappeared in October alone.
While Mississippi has so far avoided layoffs at state agencies or deferred payments to state departments, Pepper says Mississippi will still struggle, but perhaps not as much as some other states.
“My assessment in general is we’re going to hurt, we’re losing jobs, we’re going to continue to lose jobs, but it’s going to be worse on these other states that depend more on population centers and the financial centers and that saw their housing values go up so much more,” he said. So, this recession, I don’t think, is going to hurt us as much as it does the other states. Now, we’re going to suffer. We’re losing manufacturing jobs, and will continue to lose them, but we don’t have as many to lose as we did before.”
Aside from predicting where the economic bottom is, the most popular guessing game among economists is figuring when the recovery begins.
Pepper believes the answer may remain unclear even into the middle part of next year. And when U.S. markets start to recover, international markets that have also plunged into recession will follow.
“And we’ve got so many unknowns out there, like what’s going to happen with inflation, with all the money that’s being pumped into the economy,” Pepper said. “When we start recovering, they’re going to start recovering, too, and because of the competition for jobs, we may see fairly growth in the U.S. relative to past recoveries.”
Contact MBJ staff writer Clay Chandler at clay.chandler@ msbusiness.com .