Following reports that local unemployment rates have reached six year lows, a Fifth Third Bank investment strategist told business owners today that the national economy is on the verge of better times.
One spark of the recent recession was consumers borrowing more money than they could afford to pay back, and lenders extending credit with bad terms and without requiring borrowers to prove their ability to repay.
It takes more time to recover from a debt-driven recession, but more consumers are now paying off their debts, freeing more money for them to spend, said Jeffrey Korzenik, chief investment strategist for Cincinnati-based Fifth Third.
“We’re at a turning point today,” Korzenik told business leaders gathered at Moraine’s Mandalay banquet center.
Other positive economic trends include the so-called re-shoring of manufacturing jobs. Companies that once moved manufacturing jobs overseas where wages were lower, are now moving jobs back to U.S. soil as wages and other costs overseas rise, Korzenik said.
He said the re-shoring trend is in its infancy. But “this doesn’t mean we’re going back to 1950 America,” he said.
Then, 50 percent of jobs were in the manufacturing sector. Now, about 15 percent of jobs are related to production. More manufacturing jobs transferred to the U.S. from other countries might maintain the industry’s current size, he said, and prevent further erosion of manufacturing jobs from other factors such as technological advances.
While the outlook is upbeat, there are lingering problems affecting the national economy including an unprecedented length of time for laid off workers on unemployment benefits, he said. After peaking during the worst of the crisis at more than 40 weeks, average time spent unemployed still hovers above 35 weeks, according to data from the St. Louis Federal Reserve. At the time the “Great Recession” started, it was 16.6 weeks.
“Unfortunately, you can’t go through a downturn the magnitude of ’08 to ’09 without structural damage to the economy,” Korzenik said.
Ohio Department of Job and Family Services released on Tuesday the latest employment figures for cities, counties and metropolitan areas. The early estimates could be revised later. In Cincinnati, the 15-county metro unemployment rate fell to 5 percent in April, the lowest figure since April 2008.
In Dayton, the four-county metro area had 5.2 percent unemployment in April, the lowest since May 2006.
“Whether or not it will stay at that level for more than one month, it might be an aberration,” said Janet Harrah, senior director for the Center for Economic Analysis and Development at Northern Kentucky University. “As it starts to approach that 5.5, 5 percent range, (unemployed) people might jump back in” the labor pool.
Dayton’s labor force — comprised of workers and job seekers — shrank from March and a year ago. Unemployment statistics don’t count jobless who are not actively job hunting. Dayton-area unemployment might be higher when considering discouraged workers.
To the contrary, the Cincinnati labor force is growing, which Harrah found encouraging.