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Are we out of the recession?
Officials skeptical, say pain continues
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Forsyth County News
If the recession is really over, as federal officials suggested last week, it appears not many Forsyth County residents are feeling the effects.

And judging by the response of state and local leaders, most of whom laughed when asked about the news, the recession may be far from over.

The National Bureau of Economic Research recently announced that the recession officially ended in June 2009.

But the bureau relies on gross domestic product, or U.S. output of goods and services, and gross domestic income to determine when a recession begins. The GDP doesn’t really account for tangible change, officials said.

“It was just some academics with a technical definition just looking at data, but I don’t think it’s of value anywhere beyond that,” said Georgia Department of Labor Commissioner Michael Thurmond.

“In the real world, I think the recession continues, because the pain associated with it continues.”

‘Far from over’

The pain hasn’t stopped for local banks, including Citizens Bank of Forsyth County.

“As a whole, the past due percentage in the banking industry is higher now than it’s ever been,” said bank president and CEO Tim Perry. “I would have to say this recession is far from over. I wish it were not true.”

When the economy slows, Perry said, the banking industry usually doesn’t feel it for about six months, or when people start to fall behind on home, car and other loan payments.

Conversely, when the economy starts to recover, it can take as long as a year for banks to start feeling the upswing.

“Simply because by that time, at the tail end of a down economic cycle, banks will have a significant amount of foreclosures, of properties that have been repossessed, and it takes a while to liquidate those,” he said.

It’s those foreclosures that are causing the housing market to stay slow, said Scott Whelchel with Results Realty Services.

“It’s not going to get any better until we can get through these foreclosures and short sales,” he said.

While there’s no shortage of foreclosures on the market, Whelchel said banks are put in a catch-22 position.

If they sell off their foreclosures, it will flood the market with cheaper housing and drive down the price of surrounding homes.

But holding onto the homes generates no income for banks, and actually costs money with property taxes and other fees.

“I really don’t see any kind of a turnaround until we can get through these foreclosures and short sales, get some of this inventory off the market, get some buyers approved and when the banks are lending again, but not at 100 percent financing,” Whelchel said.

James McCoy, president and CEO of the Cumming-Forsyth County Chamber of Commerce, has taken a more optimistic approach.
While businesses in the county are struggling, Forsyth still attracts economic development. He said 11 companies have made capital investment announcements so far this year.

“So there’s an awful lot going on right now in terms of corporate relocations and expansions,” McCoy said.

While Forsyth is nowhere near its pre-recession business prosperity, McCoy said the county hasn’t been hit like others.

“If you look at the economic activity going on in Forsyth County and compare that to 95 percent of communities around the country, we are outperforming them on just about every measure,” he said. “What’s difficult, is that the bar of how much we are outperforming them has dropped.”

Still, in outperforming other counties, many Forsyth residents who used to commute to harder hit locations like Atlanta have found themselves out of a job.

‘Greater need this year’

It’s in the current economic times that The Place of Forsyth County has stepped up more than ever to help.

In 2009, The Place distributed more than $281,000 in financial assistance. This year, aid has exceeded $205,000, and that’s not including September’s numbers.

“Last year was a record year for financial assistance. Last year was a shocker,” said Sandy Beaver, executive director. “We didn’t know the needs were going to be that great.

“We’ve seen greater need this year than ever before, than even last year.”

In 2004, The Place gave out about $123,000 in aid. The need increased by small increments annually reflecting the community’s growth. But the recession showed up in the drastic change between $165,760 in 2007 and $247,816 in 2008.

It’s not just the financial assistance, Beaver said. There has also been a greater demand for food and clothing from the center’s food pantry and thrift store.  

“There are more people unemployed, more desperate people, more people coming in here crying and a lot of people that are profoundly depressed because they can’t get jobs, they can’t take care of their families and they can’t pay their bills and they’re losing their homes,” Beaver said.

John Scott, North Georgia College & State University associate professor of economics, said the average person out of work is unemployed for about 35 weeks.

The duration of unemployment is the highest since the Great Depression, he said.

“Coming out of a recession, the GDP increases first and unemployment drops later. It’s about a year lag, one would expect,” he said.

“It always takes a while for unemployment to adjust, because during a recession businesses have had to make big adjustments. They’ve had to do more with less, and when you have to do more with less, you’re more productive, and so output can increase without increasing the amount of workers you need.”

Not only is the job market saturated with those who lost their jobs, but people are always being added to the labor force, with college and technical school graduations and others rising to employment age.

“You need a healthy economic growth to take them all in,” Scott said.

And that’s not happening. In fact, Scott expects a double dip.

“I think we’re heading down again,” he said. “When we eventually start to recover, we’ll have a horrible inflation ... I really haven’t always been a doom-and-gloom guy.”

‘Long way to go’

Perry, the president of Citizens Bank of Forsyth County who said the recession appears far from over, also noted the bleak decline has leveled off.

“I don’t think our economy is in a free fall like it was,” he said. “There might have been some stabilization in unemployment and land values, but from where I see it, I can’t see a measurable difference.”

State labor department statistics show the unemployment rate going from 10.2 percent in July 2009 to 10.3 percent in June 2010. Preliminary numbers show the rate dropping slightly to 10.2 percent in July 2010.

The difference isn’t drastic, but the state of the labor force may have skewed some of the numbers.

Between July 2009 and preliminary July 2010 numbers, the labor force declined from 4.81 million to 4.69 million. This could indicate retirement, but it could also be a sign of people giving up the search.

Forsyth County’s numbers continue to track below the state average, with about 8.3 percent unemployed in June, versus 8.2 percent in July 2009.
Preliminary numbers from July show the rate at 8.1 percent.

Thurmond said the difference in fractions of a percentage point doesn’t show a significant recovery.

“Things will get better, but it’s going to be later rather than sooner,” he said.

Before the unemployment rate changes, banks need to become more stable and businesses need to see an increase in activity, among other factors.

But until unemployment decreases, fewer people can afford to pay their mortgages, car payments and buy commodities. The recession may be over in the books, but it appears the recovery could take a while.

“I don’t think things will get better until the unemployment rate actually falls and many economists say that that’ll be two or three years from now, so we still have a very long way to go,” Thurmond said.