Spokane7
59°
October 1, 2011
Avista economist sees the good amid the gloom
Avista economist Randy Barcus says of the current economy: “Are we paralyzed? If yes, it’s temporary. This is not permanent. This too will pass.”
(Full-size photo)
Randy Barcus, chief economist for Avista, is a repeat visitor in this Wise Words interview space. The reason?
More than a year ago, Barcus, 64, predicted with uncanny accuracy what was going to happen next in the economy. The private sector at the time was reeling from layoffs and downsizing, and he said wait until the public sector starts reeling, things will really get bad.
Boy, did they.
Quipping that “the only economists worth quoting are dead economists,” Barcus sat down again to discuss what might happen next in this roller-coaster economy.
• Are we headed for a double-dip recession? Probably. The areas of the economy that have been growing for the last couple of years are slowing down. Manufacturing has been growing steadily, but inventories are back in balance, so the ramp-up in production that occurred after the big crash is over.
The outlook for government employees continues to be grim. Retail sales have been soft and seem to be softening even more.
In a nutshell, we might already be in a recession now. We don’t have all the data measured. It will be three months until we know that the economy is contracting again. But all the revisions over the last six months have been down.
• Have we been here before? There was a severe recession in the early ’80s. There was a mild recovery and another mild recession in 1985. If history is going to repeat itself, I would expect that if we’re in a recession now, it will be short-lived. And mild.
• In 2007, if I had really known what was going to happen and said where I think we’re going to be in 2012, no one would have believed me. The people who were saying in late 2007 that the sky is falling were marginalized. Most of them were hawking their books, making millions, talking about how bad things were going to get. I thought it was a scam.
• What we have today (are) really good businesses putting not very good businesses out of business, and it’s having an impact on unemployment. One of the ways the really good businesses are doing well is they’ve figured out ways to do more with less people, because people cost a lot of money.
Some guy in Minnesota has designed a computer system that works off of GPS to drive a tractor. The biggest problems farmers have today is they have small windows for planting in the spring and small windows for harvesting in the fall, primarily because of weather, and there’s a shortage of people qualified to drive these multi-hundred-thousand dollar tractors.
Holy smokes, 50 years ago was anyone talking about robots running farm tractors? They are solving a business problem but it’s also someone’s job that’s not there now. But it might allow the farmer to improve his planting and harvesting practices and improve his yield. And someone is going to benefit making the farm equipment that operates off these things.
• Parts of the economy exhibit signs of a chronic illness. But 90 percent of the people are still working; 10 percent of people still working might be in jobs that they don’t particularly care for because they are underemployed. Another 10 percent are working part-time or full-time because they are going to school or have something else in mind and are trying to get work experience.
So now we have 70 percent of the folks actually doing OK. They like their jobs. They are using their education, skills. And it’s not luck. But here’s the thing: The constant drone from the media, no disrespect to the media, is negative, negative, negative. It is newsworthy. But it ignores the larger group.
I know a half a dozen people in the last month who have refinanced their homes. They are in that group of 70 percent. They are taking advantage of these amazingly low interest rates.
• Economics is about winners and losers. Caterpillar is going to build (a warehouse) on the West Plains. Caterpillar decided to close five small warehouses and build one super warehouse and they picked Spokane. We’ll end up with a net gain of a couple of hundred (jobs). We’re a net beneficiary. But if we were in one of those places where they were closing, we wouldn’t think this was good news.
• The unemployment rate in 10 years? In the 7 (percents). China, India and Brazil are saying, “We’d love for you to come to our country and open up a plant and we’ll give you incentives.” We’re not going to see incentives in the United States because we’re in a pinch.
• It’s easy to say, gee, we thought the unemployment rate would go the other direction and it didn’t. But we don’t know what would have happened if we hadn’t done the stimulus. We need to take a deep breath, take a couple of steps back and say the policies that are being implemented are prudent and they will take time to work. There’s no magic fix.
• Advice for underemployed young people or those looking for jobs?
Be patient. Learn all the things that will make you more employable down the road. What we have seen in the last 25 years is inflated expectations about the spectacular five jobs you would be offered once you had your degree in hand.
And most of the great jobs available in the next 20 years will be for specifically trained people in technical kinds of things. Electricians at utility companies is a great example. You don’t need an AA degree but a six- to eight-week training class. Lower your expectations. Work your tail off where you are.
• Will baby boomers hang in even longer in workplaces?
Before the financial meltdown that led to the decline in equity value in homes and portfolios, the boomers were expected to retire in a smooth and orderly fashion. The postponement of that is causing a lack of opportunity for the folks who thought they might replace us in five years. But we (boomers) have had to become more productive.
Five years ago, the general thought of people over 55 was that they weren’t going to have deal with (complex) technology. But now they are embracing it.
Eventually, (boomers) will retire. Even I will retire. Yesterday, I put on my Outlook calendar “tentative retirement date.” Am I going to tell you? No. I haven’t told my boss.
EWU economist headed to Avista; Barcus retiring 
zelda on October 01 at 10:18 a.m.
Is it necessary to interview this guy every six months? Is he on contract or something?
If your time horizon is infinity, sure, things will get better.
You might want to think about expanding the circle of wisdom.
Squid on October 01 at 12:28 p.m.
Ummm….. Farm equipment is usually driven by school kids. Sometimes 10 year old girls. There are very few qualifications to drive one, and the labor pool is huge. If you can reach, the pedals, you’re qualified. No shortage of kids. They do have to do their homework, and get some sleep, so their hours may be limited. I’m pretty sure the GPS didn’t increase profits or yields, at all, but probably did make it faster to plant, fertilize, and harvest. Farmers with the most acreage will be the only ones who benefit, because the equipment will operate around the clock. This gadget that drives a tractor, probably would never pay for itself.
How much do we (Avista) pay this guy?
jddavis on October 01 at 12:58 p.m.
I had Randy Barcus as an instructor for a couple of classes in my graduate program. He has an exceptional knowledge of economics and does not slant his statements to favor his employer or anyone else.
Squid—GPS does in fact increase profit and yield in farming. From seeding, to fertilizing, to irrigation, to disease and pest control, to harvest, to ground preparation GPS plays an important role. It is not merely keeping the tractor moving in a straight line.
dukkandpooh on October 01 at 1:22 p.m.
Great observations, and some good advice for underemployed and young people.
Squid on October 01 at 1:47 p.m.
JDDavis, I agree with what you say, but I doubt the GPS auto pilot pays for itself, unless you are harvesting 15,000 acres, or better. The bottom line season end profit can’t be more, if you add in the cost of the GPS auto pilot, and the equipment that is compatible with it’s use. I really am just guessing. The farmers still have to pay kids to drive the grain trucks that follow the combines, I’d imagine, so the hours of operation would still be limited. Again, I don’t know.
I do know that many farmers that have smaller amounts of acreage, buy old equipment, and sometimes use City sludge for fertilizer, to make things profitable. With the price of wheat, and other crops, and the fuel prices, it’s more profitable to go CRP and Soil Bank. Many farmers also subcontract all phases of operation these days.
Been many years since I have been bucking bales, or driving equipment. Don’t miss it, at all.
polistra on October 01 at 3:14 p.m.
Excellent advice about jobs.
I wouldn’t necessarily call it “lowering your expectations”, though.
If lots of kids are truly prepared for skilled technical work, the entire economy will have a MUCH better chance of resuming productive growth, which means more money for everyone in the long run. That’s the highest form of expectations.
Skilled manufacturing, NOT abstract mathematics, was America’s strong point back when we were strong, and it must become our strong point again.
The current focus on finance and abstract learning is a vain and misplaced attempt to beat China and India at their own game. It can’t work.
zelda on October 01 at 3:37 p.m.
Polistra — I agree, up to a point. There’s nothing wrong with studying mathematics. But when it’s applied to Wall St., e.g., “quants,” it’s nothing more than gambling with other people’s money.
What no one seems to want to say or admit is that the “rogue trader” guy at UBS was a gambling addict. And he was using investors’ money. Nice work if you can get it. I wish they’d fold the table on more of these operations.
greyhound2 on October 01 at 4:51 p.m.
Have we been here before? Yup. In 1929, the stock market crashed and by 1932 we were in the middle of the last Great Depression. We’re only two years into this one. Maybe we can have World War III to get out of this mess like they did in the last one.
China, India and Brazil are saying, “Bring your technology and equipment here so we can steal it and flood the US market with slave labor products and help you bust all of your unions.”
“Lower your expectations” is the motto of vulture capitalists in their war on the working class. Never mind that they are stealing all the money on their way to off-shore tax havens.
“Yesterday I put my calendar on tenative retirement date”. Why is this clown still employed? Most likely is that in a monopoly, even idiots can keep well paying jobs. Just ask the CEO, as he still there ripping off about $7 million a year.
de3 on October 01 at 6:06 p.m.
GreyHound2 - we are not just two years into this “recession”.
The official start was December 2007.
Count with me …. 2008, 2009, 2010, and almost to the end of 2011.
We are 2 months shy of 4 years, not two years.
Officially, the recession ended a couple years ago and everyone lived happily ever after. Except we still have around 10% unemployment, the EU and the EU banks are collapsing, B of A is a wreck, state and Federal governments are basically bankrupt, and who knows what else.
This isn’t a “recession” - this is a debt caused economic collapse. A different beast.
misjustice on October 01 at 6:08 p.m.
“the only economists worth quoting are dead economists,”
So, why is the SR quoting this guy, Barcus?
zelda on October 01 at 6:14 p.m.
misjustice — He’s from Avista which makes him Spokane’s economist laureate and official prognosticator. He’s allowed the occasional hyperbole.