The national and regional economies will likely be mired in a slow-growth pattern for the first half of 2013 as businesses await a resolution on government spending and the U.S. debt, a Federal Reserve economist said Jan. 11 in Stamford.
The recovery has been the slowest since World War II, said Rae Rosen, vice president and regional economist at the Federal Reserve Bank of New York. Rosen addressed more than 200 people at the Stamford Marriott for the Fairfield County Information Exchange’s annual Economic Outlook and Regional Forecast.
Rosen said the recovery has been led by a resurgent housing market, but that higher taxes on the wealthy, a reticence among consumers and businesses to take on additional debt, and widespread government austerity measures at the local, state and national levels have all tempered growth.
“If you have a financially-led recession and it’s caused by excess leveraging, it takes longer and it’s harder to recover,” Rosen said. “So that’s why it’s been a slow slog, but things are picking up.
“We have resolution to one of the key issues – the fiscal cliff – so that businesspeople and consumers should be feeling more confident, and we have one more issue in March with the budget ceiling and we think there will probably be better growth in the second half of the year.”
With a timely resolution on the debt ceiling, Rosen estimated 2013 U.S. gross domestic product (GDP) growth would be between 2.5 and 3 percent.
In Fairfield County, Rosen said real incomes are up and “the composition of the job market has probably improved a little bit” with the addition of high-tech and high-skill-level positions. However, she said, “There’s been an outright reduction in jobs.”
Statewide, “There has been a little bit of a recovery, but the level of jobs is below what it was in the year 2000,” Rosen said.
Health care and education were among the only private sector areas to show job growth through and since the recession, Rosen said. “But we’re not getting a lot of growth in the other sectors yet, and I think we should see some pickup in those as the year progresses.”
Additionally, she noted that the office vacancy rate has been slow to drop in Fairfield County.
Rosen said positive job growth, home sale and office vacancy data for New York City bode well for Fairfield County, which she said “usually gets a spillover from that.”
“Given the slow rate of growth in professional and business jobs, office vacancy rates are rising in Fairfield (County) and it might take a while to pull that down,” Rosen said. “But again, if you see what’s happening in the city … that usually prefaces a pickup here in the surrounding markets.”
Rosen acknowledged that the financial services sector is still contracting – evidenced by recent layoff announcements at American Express and Morgan Stanley – but said diversification of the county’s services companies would lead to the creation of new, high-paying jobs.
“You just have to look at what’s going on on the other side of the highway in south Stamford,” she said. “You’ve got all sorts of high-tech services. Cornell Medical just brought in a really high-tech veterinary school; I believe the Hospital for Special Surgery is opening an imaging center here. … So you’ve got a lot of exciting things in services on a much broader base.”
Christopher P. Bruhl, president and CEO of The Business Council of Fairfield County, said, “I found what we heard today to be reassuring. … It’s not time to pop the cork on the champagne, but neither is it time to head for the storm shelter.”
The Fairfield County Information Exchange is an initiative of the Business Council. The event was sponsored by Deloitte L.L.P.