Economist: With state’s economy vulnerable, expect slow growth
Mississippi’s economy isn’t terrible.
It isn’t great, either, and it’s going to be a while before it totally rebounds from the last few years.
That was the gist of Thursday morning’s legislative economic briefing by state economist Dr. Darrin Webb and state Treasurer Lynn Fitch.
Webb said the fourth quarter of 2011 was strong, with state revenue up 3.8 percent at year end versus the same period last year. “But I do not expect to maintain that pace,” he told lawmakers.
Where the state is especially vulnerable is employment. Webb’s figures show that there are still fewer people in Mississippi employed now than there were in May 2000, when the state’s number of nonfarm employees peaked. Employment numbers have recovered somewhat from the depths of 2008 and 2009, but not across the board.
“There are still areas of the state that have not participated in the recovery,” Webb said, singling out rural areas of the state where unemployment rates are still closer to 20 percent than 10 percent. It will be at least 2016 before employment rates in the state return to pre-recession levels, Webb said.
More discouraging news can be found in the number of building permits issued. In the first seven months of 2005, right before Hurricane Katrina hit, 7,615 permits were issued. For the same period in 2011, that number dropped to 2,580, a decrease of 66 percent. Permits did trend upward in the second half of 2011, Webb said, but cannot be expected to return to pre-Katrina level for another few years.
The national economy will likely slow in the first half of 2012, Webb said. Fading inventory, a weak housing sector, high government and consumer debt and trouble in Europe will make sure of that.
“And these are issues that just are not going to disappear anytime soon,” Webb said.
National GDP has started the process of recovering from the recession, showing modest growth in 2011 (1.7 percent). That will slow in 2012, Webb said, to 0.2 percent; 0.5 percent in 2013; with the possibility of a jump in 2014 to 3.1 percent. Mississippi’s GDP will follow a similar track. The overall outlook for both, Webb said, is pessimistic “but that doesn’t mean worst case.” Webb estimated the chances of another recession at 30 percent.
“I cannot stress enough the slow pace of this recovery,” he said. “As a rule, slow growth is the new norm.”
Fitch said low interest rates and the availability of GO Zone bonds after Katrina were the primary culprits for the state’s bonded indebtedness increasing over $1 billion the past six years. At year end 2011, the state’s total amount of bond obligations was $4.1 billion, representing about 12 percent of the constitutional debt limit for FY 2012. All but $995,000 of that came from general obligation bonds. That $995,000 is a self-supporting bond, Fitch said, and is paying for the Deer Island restoration project. That will be paid off in November.