It”™s going to take more than a few aspirin for the country to recover from the spending frenzy and the housing bubble bursting, according to investment banker Arthur Loomis.
More than 250 business and political leaders listened as Loomis, president of Albany-based Northeast Capital, gave his take on the region”™s economy. As guest speaker at the Orange County Partnership”™s annual investor breakfast held at the Inn at Central Valley Oct. 1, Loomis supplied some sobering statistics.
Said Loomis: “If you look at the headlines, you are already getting a feel for what 2010 holds. We have been here before, but we are sobered by the prospects ahead in the next four to five years.”
Unemployment in the region and across the state has hit a 26-year high, “because we”™ve had the wrong kind of job growth. And despite good news about the number of jobs created, half of the 79,000 jobs the state created were in government; we lost nearly 250,000 jobs in construction, manufacturing and professional and business services.”
Commercial loan growth “is coming on to some shoals,” predicted Loomis, calling commercial deposit growth “anemic.”
Traditionally, counties do exceptionally well during Wall Street turmoil, Loomis said, banks, too, can fare well, but neither has been the case during this downturn. Loomis likened the times to “a depression.”
“In terms of an economic index, I think we”™ll experience a false rally,” he said. “Pronouncements that the recession is over are misleading. How is it possible to make money in this economy? People under the age of 50 are the spenders. People over 50 are the savers. And the consumer segment will be challenging as far as growth.
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“Consumers are under tremendous pressure to spend, and they represent 70 percent of our economy,” continued Loomis.
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Dave MacFarland, president of Poughkeepsie-based Riverside Bank, asked how community banks will fare in the national equation?
“Regulatory costs are driving many community banks out of business,” Loomis told MacFarland. “The short answer: If the cost of compliance continues to pummel community banks, the number of community banks, now 6,500 across the country, may be less than 3,000 after the country shakes off the dust of the recession.”
Even in a grim economy, there is a chance for some businesses to leapfrog ahead. One of them, said the investment banker, will be the pharmaceutical industry.
Lisa Gallina, interim director of adult and continuing education at Mount St. Mary College in Newburgh, asked Loomis how the college could help students prepare for new careers.
“Health care is a gem,” Loomis said.
With the new Orange Regional Medical Center being built and the growth of medical-based industry in the surrounding area, there can be substantial opportunities for those who are going through a re-training process.”
As for the housing market, expect no quick fixes, said Loomis. “The market is soft and that will continue soft for some time. The one good piece of news is that prices are finally starting to stabilize.” On the down side, Loomis warned that interest rates are going to start climbing. Thinking of buying a house? This may be the time to try to make it happen, particularly if the housing market has a flashback to the 1990”™s, when interest rates of 15-18 percent were common.
