NORTHUMBERLAND — There’s a one in two chance the nation could enter another recession next year, Anirban Basu said Thursday.
It won’t be as deep, but it will be more painful than the recession of 2008.
“In 2008, unemployment was at about 5 percent,” he told the Greater Susquehanna Valley Chamber of Commerce on Thursday. “If we go into a recession again, unemployment right now is about 10 percent.”
He did have a bright spot: The states that are doing well relative to the last collapse are those who are providing food and energy. And the potential from natural gas extraction from the Marcellus Shale formation puts Pennsylvania — and, possibly, the Valley — in a good position, he said.
Basu is chairman and CEO of Sage Policy Group, a economic advisory company based in Baltimore. He was invited to the Valley to speak during the chamber’s annual Economic Forecast Luncheon.
At the movies
Basu, who also lectures at Johns Hopkins University, used humor to make his relatively pessimistic forecast more palatable.
His presentation used 1980s movies. The overall title was “Back to the Future,” because he was to talk about the future and how to make it look like the better times. He used “The Big Chill” in reference to the recession.
He used “Ferris Bueller’s Day Off” to talk about unemployment, “except Ferris chose to take his day off,” Basu said.
When talking about the money investors had in the early part of the past decade, he made reference to the “lottery winner’s curse.”
“When we Americans get a lot of money, we don’t know how to spend it properly,” he said. “Just ask MC Hammer, Mike Tyson or Michael Jackson.”
Needs vs. wants
As for the state of the local economy, as well as its future, Basu had some positive news.
He noted Pennsylvania added about 19,000 jobs between July 2009 and July 2010, the most recent statistics available.
And he said the area’s labor market has been fairly flat over the past year.
“It’s not getting any worse,” he said. “But it’s not getting better.”
The positive is there is potential for change. States such as North Dakota and Nebraska, which produce a lot of America’s food, as well as Texas have unemployment rates about 5 percent or lower. Meanwhile, Nevada has record unemployment about 16 percent.
Why are some states doing better?
“Because they produce what we need, not what we want,” Basu said.
Pennsylvania has an advantage because it produces hardwood for lumber, but also is growing in the natural gas industry as energy companies tap the Marcellus Shale.
One thing the area should try to capitalize on is its existing resources in an effort to leverage jobs from the natural gas industry that is blowing up in the state’s northern tier.
The Valley has several universities that could begin to focus more on educating people to work in the industry, he said. There also are other opportunities to service those doing the drilling, but not have to deal locally with the environmental impact.
“I hear so many people say, ‘If only they’d put Marcellus Shale under our feet,’ ” he said. “I disagree. I’d rather be the lawyer or other professional serving those people rather than actually doing the drilling.”
Growth stalls
Some local business leaders who attended the luncheon said they enjoyed the presentation, but weren’t sure what the future might hold.
Garry Berfer, with Mifflinburg Bank and Trust, said his and other local banks are poised and ready to lend. However, there has been little growth in small business, and much of what the bank has seen are refinancing of existing debt, not new purchases.
He said many people are still “nervous.”
“We have a lot of good, stable banks locally,” he said. “We want to put our best foot forward.”
Richard Wible, president of R.E.W. Insurance & Financial Services LLC in Lewisburg, agreed with Basu’s assessment that there’s a one-in-two chance of another recession next year.
“I’ve been conservative for a while now,” he said. “There’s so much that’s unknown. I just focus on the short-term and take profit wherever you can.”
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Anirban Basu, chairman and CEO of Sage Policy Group, a economic advisory company based in Baltimore, speaks at theGreater Susquehanna Valley Chamber of Commerce meeting on Thursday. Liz Rohde/The Daily Item
Discussion
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