Recession already a reality from West Virginia to Wyoming
Bloomberg Steve Matthews 12 Hrs ago (1:00 AM 02/21/2016) (wrote this 1:00 PM 02/21/16)
Dale Oxley doesn’t need to hear about rising odds of a U.S. recession to dread the future. For the West Virginia homebuilder, the downturn has already arrived.
“Everyone is going to have to tighten their belts,” said Oxley, the 48-year-old owner of a Charleston-area construction company. “The next couple of years are going to be difficult.”
As economists size up the chances of the first nationwide slump since 2009, pockets of the country are already contracting. Four states -- Alaska, North Dakota, West Virginia and Wyoming -- are in a recession, and three others are at risk of prolonged declines, according to indexes of state economic performance tracked by Moody’s Analytics.
The regions suffering the most are in the flop stage of the energy industry’s boom-to-bust cycle, and manufacturing- dependent areas hurt by a rising dollar are at risk of receding. Whether the weak links break the entire U.S. economy will hinge largely on a group that’s benefited from the energy price collapse: American consumers.
“The impetus for weakening regional economies is the huge fall in energy prices and other commodities prices, which is taking a tremendous toll,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who is concerned of a broadening into a national recession. “If the consumer were to falter for any reason, that would be a big problem.”
Job gains and losses are key factors that the National Bureau of Economic Research uses to chart U.S. expansions and recessions. Even as U.S. employers added 2.7 million workers in 2015, job cuts last year totaled 18,800 in North Dakota, 11,800 in West Virginia and 6,400 in Wyoming, according to the U.S. Labor Department.
The common thread? They all have concentrations of energy companies. A 72 percent plunge in crude oil prices since a peak in June 2014 has led to lower production and firings.
So far, Federal Reserve officials view the patches of hardship as isolated and the chance of a recession as remote. Chair Janet Yellen told Congress on Feb. 10 that falling energy prices “have caused
companies to slash jobs and sharply cut capital outlays,” but she didn’t expect a nationwide recession.
“There would seem to be increased fears of recession risk” reflected in tightening financial
conditions, she said in her testimony. “We’ve not yet seen a sharp drop-off in growth, either globally or the United States, but we certainly recognize that global market developments bear close watching.
Still, seven of the 50 U.S. states have had downturns in economic activity over the final three months of last year, according to tracking by the Philadelphia Fed.
Louisiana, New Mexico and Oklahoma are all at risk of recession, according to Moody’s. Wyoming and North Dakota’s economies have declined for at least the past 10 months, according to the Philadelphia Fed.
The median probability for a U.S. recession in the next 12 months jumped to 20 percent in a Bloomberg survey of economists this month, the highest since February 2013.
Dollar’s Strength
A second blow to regional economies is the dollar’s surge, reflected in a 22 percent increase in the Bloomberg Dollar Spot Index since mid-2014, which is weighing on U.S. producers that compete globally. Illinois, Wisconsin, Louisiana and Mississippi --manufacturing states hurt by the currency’s march higher -- have all had economic declines in the past few months.
The spottiness of the expansion represents a turnaround from the broad recovery after the deepest downturn since the 1930s. As recently as October 2014, every state was expanding, according to Paul Flora, an economist with the Philadelphia Fed.
For every 25 percent drop in oil prices, employment could be expected to decline 0.6 percent in Texas and 0.8 percent in Louisiana, while Wyoming stands to lose 2.1 percent of its jobs and North Dakota and Oklahoma about 1 percent each, according to research by Stephen Brown, an economist at the University of Nevada, Las Vegas, and Mine Yücel, director of research at the Dallas Fed.
Growth in Texas has slowed with falling oil prices, though the state continues to expand because of a diversified economy including technology jobs in Austin and development in Dallas. Texas added 166,900 jobs in the year ended in December, behind only California and Florida.
The situation today echoes what happened three decades ago, when falling commodities prices caused regional pockets of distress in energy and farm states, Flora said. “This seems similar to 1985-86 which did produce a recession in Texas and other energy states,” he said. “But it did not spread to the rest of the nation.”
This time around, the relatively healthy state of American consumers may keep the economy afloat. Retail sales rose 3.4 percent in January from a year earlier, the biggest jump in a year, and stagnant wages are showing signs of perking up: Average hourly earnings in December rose 2.7 percent from a year earlier, the biggest advance since mid-2009.
“We’re taking account of the fact that the energy sector is very hard hit. We’re losing jobs there,” Yellen said Feb. 10. “But with respect to employment, although there really are very severe losses, it’s a pretty small sector of the work force overall.”
That’s cold comfort in places like Kimball, West Virginia, where the setbacks include the closing of a Wal-Mart store. “We are experiencing stagnation overall in the rest of the economy,” said John Deskins, an economist at West Virginia University in Morgantown.
Oxley, the builder, said his company’s business has held up more than most in part because he serves wealthier customers, including doctors, who continue doing well (imagine that?) . Still, recession conditions are dampening everyone’s confidence.
Oxley’s Modern Home Concepts built four $500,000 custom homes last year in southern West Virginia, down from five in 2014 and fewer than half 2009’s level, when the last U.S. recession ended. About 200 people are employed on contract for each home, he said.
“There is not a lot of job creation and you are not creating new households,” he said. “I am not optimistic in regard to our future in West Virginia.”
I am going to do a little of my "Truth in Advertising here and state I have never talked too or seen Mr. Oxley. It is possible I have seen an ad for his company but that would be it?.
Anyone who is paying any attention at all knows how tough it is for most of the average folks in this State? 80 years at least of Political foolishness has pretty much set us up for what is occurring now with the drop in Severance Taxes for Coal and some of the same for the Oil/ Gas businesses here. It was a Political given that the Severance Taxes might go on forever?
Yet, in the "Their Opinion" column on Monday, Mr. Myer in his "More corners to turn in W.V" seems to think things are going to start coming up Roses? He is right that far too many people think that West Virginians are ignorant (or stupid), lazy hillbillies. I know as he does and so many of you do also that it is NOT true. Some of us are "ignorant" because we don't know any better. But once we see the light of what is and has been happening then we never forget.
I got my first taste of a West Virginia boy in 1973 when I strolled into the 593rd Support Group Headquarters in Fort Lewis WA., and met a Senior NCO who was born & raised in the Coal field area in the Southern part of the State. He for sure had that drawl but also for damn sure was not lazy. He was a street smart guy who took the best way out for him as he had no desire to work in the mines. In his way, he taught me a lot about good old fashioned people who struggled to survive and prosper under some tough conditions. I do not give my respect lightly to any one. But he for sure earned mine in the few years I worked with him. Only thing he ever told me that I did not fully accept was that I should not be eating oatmeal for breakfast because it was too much for me as I was prone to "chubby" by Army standards.
The "Our Opinion" column on Monday also was iffy? Sure West Virginia is different. Sadly, too many of you are too complacent. You have either trusted or ignored your Government at every level for far too many decades. It has been allowed to develop into a many headed Hydra at each level that has more hands than an Octopus has tentacles. Each one is capable of picking your pocket without you even knowing it.
You good folks are lied too and misled day by day, month by month and year by year. The blame for the poor educations here are the fault of (fill in the blank)? In truth, it is the fault of 80 years of Democratic Governance in collusion with the Teacher's Union(s); the School Boards and Lord knows how many Panels/ Groups/ Get to gathers that keep coming up with everything but good high quality curriculums. Can the Republicans do any better? Who knows, they are talking a good show?
The object of the drill is everyone needs a four year College Degree. I am going to make this simple- Bull S***. What many of the kids need is a good up to date Vocational system with two year degrees OR less. Did you know that the average age for a Machinist is 55? That there are several hundred thousand openings for Tool and Dye workers? In some respect both of the above are the same; but as in all things, there are differences in what they need to know. All the kids are getting in a four year College is High Debt; Unemployment and back home to mom and dad.
Have any of you seen the State Board of Education or the local school board partnering with the local Craft Unions for apprenticeships? Set up in house the beginnings of what we used to call "Shop"; where the boys in the day learned about Carpentry and Auto Repair? We have gotten away from the basics so far that now a days, finger painting and basket weaving may be high school courses?
Yes, West Virginians are in some ways "different". But so are the folks in Eastern Oregon and Washington from Western Washington and the Willamette Valley from Eugene to Portland in Oregon from most of the rest of Oregon..
Don't let anyone tell you that you have a right to fail because you are "different". Your right to "fail" is because you have tried something new and did not get it quite right. But if you never try than you are not doing anything to improve yourselves or the lives of those you love.. Being different means that in any situation, you can see the wheat from the chaff and still have a lot to offer. In many parts of this Country "Mom and Apple Pie" are no longer what they are here; to love and be loved for those beliefs. I am different from many of you because I have been in a lot of places you will never be in and seen things I would not wish on my worst enemy. So what? Right now, I am one of YOU- DIFFERENT.
We may be in a Recession or going into one; the Truth as always will out in time. 'nuff said.
(Paid for by the Candidate- Lawrence Wilson for Mayor of Vienna).