Hardship likely to endure as economy recovers, say conference speakers

MURFREESBORO -- Several speakers at the annual Middle Tennessee State University Economic Outlook Conference said key parts of the economy have stopped getting worse -- but that may still leave several years of hardship as the economy tries to climb out of the hole.

One speaker even predicted it could take five years for employment to return to pre-recession levels.

C. Dowd Ritter

C. Dowd Ritter, CEO of Regions Financial Corporation, the parent company of Regions Bank, was the keynote speaker for the conference. He said the groundwork for economic recovery seems to be in place and said Standard & Poor's Case-Shiller index shows improvement in home values in 18 of the 20 cities where it tracks such information.

Ritter said Tennessee may recover more heartily than some other parts of the nation due to its educational institutions, a diverse and balanced economy, and new economic developments such as the Volkswagen plant in Chattanooga and the Hemlock Semiconductor plant in Clarksville. He said home values have declined less in Middle Tennessee than in other parts of the country.

Less hand-holding

Donald Ratajczak

Economist Donald Ratajczak, a popular source on various TV news programs, is a fixture at the conference, traditionally giving the luncheon address. The animated Ratajczak is retired from Georgia State University but in heavy demand as a speaker and consultant. He said he flew 54,000 miles in June alone. But he said his schedule has gotten lighter as the year goes on -- which he takes as a positive sign for the economy, if not his checkbook. He said his heavy schedule in early 2009 was due to intense public anxiety about the economy, which seems to be easing.

"They don't need their hands held as tightly as they did the first half of the year," said Ratajczak. Ratajczak is predicting growth in the economy for the third and fourth quarters of 2009 and for all four quarters of 2010. But he said unemployment will remain high through next year, and local government revenues will drop even lower next year as the impact of lower property values affects property tax appraisals.

'A lousy 12 months'

David Penn, director of MTSU's Business and Economic Research Center, gave the economic forecast for Middle Tennessee, focusing on the Nashville metro area.

"Truly, a lousy 12 months have passed for us," said Penn.

He said Davidson and Rutherford counties are now showing signs of improvement in property values, Sumner County is flat and Williamson and Wilson counties still have falling property values.

Penn predicted that job losses will bottom out for Middle Tennessee in the next 3-4 months but that it could take 4-5 years to recover the lost jobs.

Penn said unemployment is higher in the counties outside the metro area because they are more dependent on durable goods and specifically automobile parts manufacturing.

He said the population of Middle Tennessee continues to increase, which means that the area has that much farther to go to overcome job losses. He predicted it could be late 2013 or early 2014 before unemployment rates return to pre-recession levels.

Penn said business conditions will improve before hiring does.

Ritter noted that the Great Depression had an impact on consumer behavior for decades, and said the current recession appears to have similarly prompted some families to borrow less and save more.

Regulation

The speakers sometimes offered differing perspectives on the events of the past two years and how they can or should be dealt with. Ritter complained about the proposed creation of a Consumer Financial Protection Agency, saying additional bureaucracy isn't needed and would be a burden on responsible banks which didn't create the economic crisis. He said Regions was not involved in sub-prime mortgages or the complex securities which were based on them.

Ratajczak, however, said that it was poor regulation which led to the crisis. He said that collusion, or economic situations that amount to collusion, keeps the free market from operating as it should and said some intervention is necessary to ensure a truly competitive environment. He said even Adam Smith, whose "The Wealth of Nations" is considered a defense of the free market, nevertheless includes warnings against the danger of collusion.

Ratajczak said the situation which existed before the housing crisis kept the free market from operating efficiently and said government intervention was, to some extent, necessary.

But Ratajczak was sharply critical of continuing huge deficits from this point forward, saying that a proposed $1.3 trillion deficit is "absolutely wrong -- that is bad fiscal policy."

Health care

Ratajczak also said that, regardless of one's philosophical or political opinions on health care, the economy cannot afford an expensive health care initiative right now.

Ritter criticized proposals that the federal government take over student loans.

"The federal government is not going to do something better than the free enterprise system," he said. He predicted that a federal system would be slower and make it harder for families to get student aid.

Ratajczak predicted that oil prices will remain no higher than $75 to $80 per barrel for the next two to three years, and could drop even lower if there is a mild winter this year.

The conference, sponsored by MTSU's Jennings A. Jones Chair of Excellence in Free Enterprise, its Business and Economic Research Center, and its Weatherford Chair of Finance, was held for the second year at the Embassy Suites Hotel and Conference Center in Murfreesboro. Prior to that, it was held on the MTSU campus. The conference has been held for about 20 years, although even university officials aren't sure of the exact number.

A regular feature of the conference is the presentation of the Jennings A. Jones Champion of Free Enterprise Award. C.M. "Bill" Gatton, who owns a chain of car dealerships and who supplied the land for the Embassy Suites and the adjoining shopping complex, The Avenue, was this year's award recipient.