At the Vermont Economy Conference in Burlington on Jan. 8, Gus Faucher, Moody’s Analytic, projected the path of the U.S. economic recovery, and Dick Heaps and Art Woolf, Vermont Economy Newsletter, described Vermont’s experiences:
| Headline | More information |
|---|---|
| The Great Recession is over | This recession was the worst since the Great Depression in terms of duration and change in GDP. |
| With some areas expanding | Vermont will be one of first northeastern states to enter expansion. Some Midwest states such as Nebraska and Iowa are already expanding. |
| Policy makers stabilize the banking system | TARP restored faith in the banking system and loans will start flowing soon. |
| And fiscal stimulus provides a vital boost to the economy | Federal spending ended the recession, but is scheduled to dwindle down in 2010. Will the economy be able to continue expanding without more stimulus money? |
| Job creation “craters” | Hours in the average work week fell (as FT employees became PT and PT employees worked even fewer hours). During recovery, UR will be slow to improve because hours for PT workers will be increased, rather than new workers hired. |
| But fiscal policymakers are responding | … through more aid to unemployed workers, extension of the homebuyer tax credit, and other proposed measures. |
| More house price declines are coming | Vermont prices will likely fall a total of 7% by the end of 2010 (compared to 38% for the U.S.) Although prices will stabilize in 2011, Vermont is likely to have very little housing price growth for the next 7-8 years. |
| As pace of foreclosures picks up again | Nationally, foreclosures stalled recently as banks waited to see what happened with temporary modifications, but most of these modifications will end in foreclosure and foreclosures will pick up again. The percentage of sales in an area that are foreclosures is directly related house price declines in that area. |
| Almost a third of all homeowners nationally are “underwater” | This has lead to a rise in “strategic defaults” as homeowners walk away from their mortgages, even though they can afford to make payments. They rent for a while and then buy again. |
| The federal Modification Plan may need modification | About 402,000 foreclosures have been avoided due to the Plan. This is only a drop in the bucket and not nearly enough to stem the foreclosure problem. |
| Credit markets remain dysfunctional | Issuances of residential mortgage backed securities, commercial MBS, and collateralized debt obligations are drastically reduced for now. The vast majority of issuances these days are asset-backed securities. |
| But the Fed will remain aggressive | They will likely commit to even more credit easing. |
| Vermont home sales improve | The number of home sales is starting to increase again. 4th quarter 2009 sales were slightly higher than the prior year. Sales of existing homes expected to be up 30% in 2010 and then to remain flat. |
| Vermont leads the region in job gains, but will lag in the expansion | Vermont is the first northeastern state to stop losing net jobs, but will not gain as much as the nation during the recovery. |
(Source: Moody's economy.com)
A complete set of graphs and tables presented at this conference is available through the Vermont Economy Newsletter Web site. Next month we'll provide additional information and predictions from economists about Vermont jobs during the recovery.