Economists see improvements in commercial construction and home sales

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The Charlotte region ended 2010 in a state of transition, stuck in an economic recovery that didn’t feel like one, and in many ways, this year will deliver more of the same, economists say. The Charlotte Observer reports 2011 looks stronger than last year, and that more companies and consumers are taking note.

“While we’ve still got a lot of climbing left to do, there are more and more people who have begun that climb,” said Rick Kaglic, an economist at the Federal Reserve in Charlotte. “It’s a modest increase, but it’s broad-based, and that’s kind of the encouraging thing about it.”

Local indicators from unemployment to home sales to commercial building permits point to a rebound early this year, after a stretch of setbacks in the second half of 2010. Home sales, for instance, rose 18 percent in January over the previous year, and foreclosures fell that month by nearly a third.

Kaglic and two other economists weighed in last week on the latest economic data from Mecklenburg County – and what it means for the year ahead. Last year was like a roller coaster, with the economy growing in fits and starts, due in part to government stimulus, Kaglic said. Looking forward, he expects the recovery to progress a little more evenly.

Employers have reported in recent business surveys more output and demand, and more firms are gaining the confidence to hire again, Kaglic said. That likely means a gradual improvement in the Charlotte area’s unemployment rate in 2011, especially in the second half of the year, he said.

Wells Fargo economist Mark Vitner says there’s some good news in the local economy, but also enough bad news to mean the recovery will remain painfully slow, Vitner said.

“It’s not a fast enough pace so people without jobs can readily find a comparable job,” he said. “… That makes it tougher for home sales and retail sales to bounce back all that rapidly.” Vitner expects stronger job growth in 2011, particularly in finance, commercial real estate, leisure and retail. But he said it could take until the middle of the decade or longer to replace the more than 74,000 jobs the Charlotte region lost during the recession and to return to the sub-5 percent unemployment levels the area routinely experienced before the recession.

UNC Charlotte economist John Connaughton was more optimistic, saying the Charlotte-area economy has turned a corner. The number of unemployed workers has fallen, and jobs are slowly returning. Although lagging indicators such as falling residential building permits and still-troubling foreclosure rates continue to pose a problem, 2011 will bring more job opportunities and more confident consumers, he said.

That means people will be more likely to spend – and economists won’t be called on as much to speculate on the region’s outlook, a sure sign of improvement, Connaughton said. Connaughton expects the most job growth in the business and professional services, finance and health sectors, while jobs will remain scarce in manufacturing and construction. He said the NC unemployment rate is likely to fall to 9.5 percent by the end of the year, and while that’s still well above prerecession levels, the drop will feel significant compared with years past.

Connaughton said it could take four years for the state to gain back the jobs it lost during the downturn. But for many local workers and businesses, the recovery will be well on its way before that. Read more.

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