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Stephen Fuller says worst of economic troubles probably behind us Date published: 4/4/2009
BY BILL FREEHLING
The worst of the economic downturn is probably over, a well-known economist in the region told a group of Fredericksburg-area business leaders Thursday. "Look toward Labor Day," said Stephen Fuller, director of the Center for Regional Analysis at George Mason University. "It looks much better. It really does." Fuller made his remarks Thursday night at Germanna Community College as part of the Rappahannock Area Business Leadership Forum, which started a year ago and is sponsored by the Hirschler Fleischer law firm. Fuller noted that the awful economic news that is now making headlines--a shrinking gross domestic product, soaring unemployment, falling housing prices--is backward-looking. He urged people to look toward an improved future, but warned it won't get better quickly. Fuller said that fourth-quarter GDP in the U.S. was the worst since 1992, and it's possible that this year's first quarter might be even bleaker. He said the second and third quarters will probably be negative also, though not as bad as the previous two. He expects some growth by this year's fourth quarter. Unemployment will probably continue to rise for another year, he said, as companies don't start hiring until after business has started to improve. He doesn't expect U.S. unemployment rates to return to 6 percent until 2013. He thinks job losses won't be as severe going forward, however. Fuller said the gains he expects in GDP in 2010 will be mostly driven by the federal stimulus, while the private sector will pick up the torch in 2011. He's seeing some rays of light--including additional housing sales, better manufacturing numbers and improved prospects for home building. Fuller noted that the Washington area is not immune but is cushioned by the growth in federal jobs. The Fredericksburg area benefits, as many people who work there live and shop here, boosting the economy. He said Fredericksburg benefits from having a sense of place, unlike some predominantly suburban areas between here and Washington. The Washington metro area has one of the lowest jobless rates in the country, though even it has lost jobs in the past year. Still, Fuller noted that there has been job growth regionally in better-paid fields such as health care and professional services, while the losses have been in lower-paid jobs including retail and construction. "The job number doesn't tell the whole story," Fuller said. "It's what kind of jobs you're getting." Fuller thinks regional housing prices may have another 5 percent to fall but are getting close to a bottom. Some areas may have already bottomed, he said. He also said that the regional commercial real estate market is overbuilt by probably two or three years. That's creating larger-than-average vacancy rates and lower rents, particularly in the retail space. He doesn't expect construction to pick up until 2011. But he pointed out that the positive is that the region has ample space to show prospective clients, which has been helpful in landing new businesses. The slides that Fuller used for the presentation are at Fredericksburg.com/blogs/bizbrowser. Bill Freehling: 540/374-5405
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