Drop in wealth behind recession, economist tells NCACC Board

While the nation's economic slowdown has softened the employment market, job loss hasn't been as bad as it has been in recent recessions – especially in North Carolina, according to an economist with N.C. State University.

Dr. Michael Walden, a William Neal Reynolds Distinguished Professor at N.C. State, addressed the NCACC's Board of Directors during its Aug. 21 meeting in Craven County.

During the first five months of the 2001 recession, North Carolina's job loss rate stood at 1.4 percent, compared to 0.4 percent during the current recession. To see where the recession is hurting people, Walden said, you have to look at real household wealth, which has declined in each of the past three quarters.

"That hasn't happened in a long time," Walden said. "It's been a wealth-driven slowdown rather than a job-driven slowdown."

Contributing to drastic drops in household worth has been the housing crisis. A high number of foreclosures is especially hitting metro areas hard, and repeat home sales prices have been on the decline since early 2006.

"We have not been through something like this on a national level since the 1930s," he said. "Real estate professionals don't know how to take this."

Walden said the market simply needs to work off an excess in inventory before declining housing indicators begin to reverse.

"What's going to turn all this around is that lower prices and cheaper financing ... will both make buying a house more affordable," he said.

Walden said supply and demand is also one factor behind the surge in oil and food prices, and "people do have a gripe" about the price of fuel because it is at a higher inflation-adjusted rate than it was during the 1980 gas crunch.

Looking ahead, Walden forecast a slow economy through 2009.

Among other actions, the Board approved a formal Memorandum of Understanding for the Local Elected Leaders Academy that clearly defines the roles of the School of Government at UNC-Chapel Hill, the League of Municipalities and the NCACC in the program. Among its responsibilities, the NCACC will promote LELA programming – specifically, the Board approved an allocation of $5,000 to produce and distribute marketing brochures for the first two years of the LELA program. Under the MOU, this expense will be incorporated within registration fees after two years.