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2008-04-06 BACK
A Recession in 2008?
A Recession in 2008? This article originally appeared in the Texarkana Gazette on April 6, 2008 By Larry Davis, Ph.D. Professor of Economics & Management, College of Business, Texas A & M University-Texarkana On February 29, an Economic Forecast Forum sponsored by the College of Business, Texas A & M University-Texarkana, given the diminishing health of the U. S. economy, addressed the question of whether the Texarkana area will experience an economic recession in 2008. That same question is being forwarded here. By way of introduction, readers should consider that most, if not all, economic decisions are made in a political arena. Also, to start us all on the same page, a recession is considered to be a period of general economic decline, specifically, a decline in Gross Domestic Product (GDP) for two or more consecutive quarters. Relevant factors when assessing the current U. S. economy include the bursting of the home bubble, the recent credit disruptions, diminishing employment (down 82,000 so far this year), high food, energy, and transportation costs, and the uncertainty in the current political arena. So what's in our near economic future? Approaching the end of 2007, twenty-five percent of a group of prominent economists predicted a U. S. economic recession in the near future. By March of this year that prediction had grown to forty-five percent. Although economic indicators for the national economy have been deteriorating to the point of attracting wide-spread media and political discussion, the United States may be headed in that direction but has not yet officially entered an economic depression. Relevant data provided by the Federal Reserve Bank of Dallas illustrate that all geographic areas are not equally affected by economic downturns. For example, the Texas job growth rate of 3.1 percent in 2007 was triple the nation's 1 percent and exceeded the state's long run average of 2.8 percent for the third year in a row. Texas also claimed twenty-eight percent of the new U. S. jobs that were created in 2007. The Federal Reserve Bank of St. Louis documented moderate growth in Arkansas over the same period. From 1941 into the 1960's, the Texarkana area employment levels had major ties to the Lone Star Ammunition Plant and the Red River Army Depot that employed 17,000 people at the peak of World War II, but only 5,000 in 1951 preceding the Korean War. The regional economy was not sufficiently diverse to absorb such fluctuations. That weakness was overcome as the Cooper Tire & Rubber Company, the paper mills (International Paper Company and DOMTAR), ALCOA, the Ash Grove Cement Company, Smith-Blair, Southern Refrigerated Transport, and other companies established operations in the region. It is my estimation that their collective employment exceeds 5,000. In addition the growth of Texarkana as a regional medical center that includes Wadley Regional Medical Center, the CHRISTUS St. Michael Medical Complex, the HealthSouth Rehabilitation Hospital, the Collom and Carney Clinic, and the numerous additional medical, dental, pharmaceutical, and long-term care facilities provides additional significant area employment, estimated to approach 4,000. Adding to the area economic employment base are the many retailers, service providers, governmental & educational organizations, utility companies, and the construction & construction support companies. The concluding point is that the Texarkana area over the past 25 or so years has become an economically diverse metropolis that makes the area not so vulnerable to economic fluctuations that have an adverse impact in other parts of the country. By mere observation, one has to acknowledge the economic significance of the area's ongoing highway/roadway construction projects, the scheduled warehouse expansion at RRAD, the Ash Grove Cement expansion, the ongoing construction of retail firms, the recently announced new mall construction, and the contingent SWEPCO construction project at Fulton, AR. Pointing out the dangers of projection, how many people in December predicted that the New York Giants would become the Super Bowl champions? Who can predict with assurance the presidential nominee of the Democratic Party? Who will be in the Final Four in pursuit of the NCAA men's college basketball championship? With that caution of the fallacy of prediction, given the relevant variables presented above, it is my forecast that a recession is unlikely in the Texarkana area's near future.
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A Recession in 2008?
A Recession in 2008? This article originally appeared in the Texarkana Gazette on April 6, 2008 By Larry Davis, Ph.D. Professor of Economics & Management, College of Business, Texas A & M University-Texarkana On February 29, an Economic Forecast Forum sponsored by the College of Business, Texas A & M University-Texarkana, given the diminishing health of the U. S. economy, addressed the question of whether the Texarkana area will experience an economic recession in 2008. That same question is being forwarded here. By way of introduction, readers should consider that most, if not all, economic decisions are made in a political arena. Also, to start us all on the same page, a recession is considered to be a period of general economic decline, specifically, a decline in Gross Domestic Product (GDP) for two or more consecutive quarters. Relevant factors when assessing the current U. S. economy include the bursting of the home bubble, the recent credit disruptions, diminishing employment (down 82,000 so far this year), high food, energy, and transportation costs, and the uncertainty in the current political arena. So what's in our near economic future? Approaching the end of 2007, twenty-five percent of a group of prominent economists predicted a U. S. economic recession in the near future. By March of this year that prediction had grown to forty-five percent. Although economic indicators for the national economy have been deteriorating to the point of attracting wide-spread media and political discussion, the United States may be headed in that direction but has not yet officially entered an economic depression. Relevant data provided by the Federal Reserve Bank of Dallas illustrate that all geographic areas are not equally affected by economic downturns. For example, the Texas job growth rate of 3.1 percent in 2007 was triple the nation's 1 percent and exceeded the state's long run average of 2.8 percent for the third year in a row. Texas also claimed twenty-eight percent of the new U. S. jobs that were created in 2007. The Federal Reserve Bank of St. Louis documented moderate growth in Arkansas over the same period. From 1941 into the 1960's, the Texarkana area employment levels had major ties to the Lone Star Ammunition Plant and the Red River Army Depot that employed 17,000 people at the peak of World War II, but only 5,000 in 1951 preceding the Korean War. The regional economy was not sufficiently diverse to absorb such fluctuations. That weakness was overcome as the Cooper Tire & Rubber Company, the paper mills (International Paper Company and DOMTAR), ALCOA, the Ash Grove Cement Company, Smith-Blair, Southern Refrigerated Transport, and other companies established operations in the region. It is my estimation that their collective employment exceeds 5,000. In addition the growth of Texarkana as a regional medical center that includes Wadley Regional Medical Center, the CHRISTUS St. Michael Medical Complex, the HealthSouth Rehabilitation Hospital, the Collom and Carney Clinic, and the numerous additional medical, dental, pharmaceutical, and long-term care facilities provides additional significant area employment, estimated to approach 4,000. Adding to the area economic employment base are the many retailers, service providers, governmental & educational organizations, utility companies, and the construction & construction support companies. The concluding point is that the Texarkana area over the past 25 or so years has become an economically diverse metropolis that makes the area not so vulnerable to economic fluctuations that have an adverse impact in other parts of the country. By mere observation, one has to acknowledge the economic significance of the area's ongoing highway/roadway construction projects, the scheduled warehouse expansion at RRAD, the Ash Grove Cement expansion, the ongoing construction of retail firms, the recently announced new mall construction, and the contingent SWEPCO construction project at Fulton, AR. Pointing out the dangers of projection, how many people in December predicted that the New York Giants would become the Super Bowl champions? Who can predict with assurance the presidential nominee of the Democratic Party? Who will be in the Final Four in pursuit of the NCAA men's college basketball championship? With that caution of the fallacy of prediction, given the relevant variables presented above, it is my forecast that a recession is unlikely in the Texarkana area's near future.
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