S.C. recovery might be year away, economists say

COLUMBIA -- South Carolina's economy is going to get worse before it gets better, USC economists forecast Wednesday.

In 2009, South Carolinians will find fewer jobs and will earn and spend less than they did this year, the economists reported.

A rebound could begin in the middle of the year if the financial markets and consumer confidence improve, economists Doug Woodward and Paulo Guimaraes told an economic outlook conference that drew more than 200 business leaders.

But signs point to a recovery coming in 2010. That's because South Carolina's economy was not at the forefront of the woes hurting the economy: the housing bubble and the fall of the financial markets.

The state did not go into recession until this fall, well after the nation fell into one.

"This was so unfair," Guimaraes told the conference. "The South Carolina economy was on the right track. Employment was growing at a rate not seen in several years. We got hit by something outside of our doing."

South Carolina's lack of a diversified economy will hurt recovery efforts, said Darla Moore, a Lake City financier for whom the University of South Carolina's business school is named.

"We get hit harder and come back slower," Moore said in an interview after speaking at the conference.

The last national recession in 2000 lasted about a year, but the state needed two years to recover, Guimaraes said. The latest U.S. recession began a year ago, the National Bureau of Economic Research said this week.

It's expected that the job market will be hit hard next year. South Carolina will have 22,000 fewer jobs next year, with many of the losses coming from areas pinched by the downturn construction and manufacturing.

More cuts could come from areas of the economy thought to be safe from downturns. The full effects of S.C. budget shortfalls have not hit state government, which already has been trimmed by $625 million.

Unemployment will rise to 8.6 percent statewide in 2009, the economists forecast. The current jobless rate of 8 percent is a 25-year high.

Unemployment could even zoom past 9 percent some months next year, as more people look for work after seeing losses in their retirement plans, Guimaraes said.

Single-family housing permits are expected to fall about 35 percent for the second straight year. Permits already are in a near year-long slide not likely to end until inventories fall.

Retail sales are expected to rise less than 1 percent, bolstered by spending from tourists.

That's good because South Carolinians won't have much more to spend next year. Personal income is expected to rise by just 3.3 percent, similar to the annual hike in inflation. Personal income rose about 8 percent as recently as 2006.

Woodward said he does not believe the economy will go into a depression, though the latest recession has characteristics of one. Look at how the crisis in financial markets has become a crisis in the real economy of jobs and spending, he said.

Lower gas prices should help, perhaps even more than another government stimulus, because they could boost consumer confidence, Woodward said. Still, that could be dampened somewhat by growing debt, he added.

Woodward, whose presentation included images of a foggy roadway and a nuclear bomb cloud, did have some good news.

For now, home and stock prices are more affordable, he said.

And no matter when the economy recovers, Woodward said, a rebound should last at least five years.

"We will not be going into the abyss," he said.

Signs of the times

The nationwide recession has hit South Carolina. USC economists predict pain in everything from housing permits (a big drop again) to retail sales (barely breaking even) in 2009. Jobs are expected to get hammered in the slowdown in housing and trade, which also will hurt income.


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SOURCE: USC 2009 Economic Outlook