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.