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The Golden Triangle wasn't recession proof after all – The grim statistics are proof

Triangle wasn't recession prooft after all

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RESEARCH TRIANGLE PARK, N.C. – So the Golden Triangle is recession proof, eh? Bah.

Mike Walden, resident economist and financial guru at N.C. State, laid out in the most grim detail Monday just how badly the recession has hit high-tech, biotech central.

“If ever a two-year period conclusively demonstrated the Research Triangle region is not recession-proof, it is the years 2008 and 2009,” Walden wrote in his latest economic forecast for North Carolina.

“Although the region eked out a tiny increase in jobs in 2008, the retreat in retail and home sales foreshadowed bad economic news for 2009. Indeed, in 2009, jobs fell by an unprecedented (for the region) 4%, and retail and home sales both pulled back at double-digit rates.”

The Skinny has always cringed as economic developers and regional boosters have asserted over the years that the Triangle would escape any future economic downturn. With state government, three major universities, high-tech and life science firms, the pillars of an impervious economy were supposedly in place.

Now we have a $4 billion state budget deficit, the universities are slashing costs and headcount, and the tech-related companies are struggling to deal with worldwide cuts in IT, R&D and all manner of related expenses.

Look at these numbers:

• Unemployment, 2008: 5.3 percent
• Unemployment forecast this year: 9.1 percent
• Unemployment 2010 forecast: 8.4 percent

Please note: That last number is assuming there IS a recovery.

Retail sales were down 6 percent last year, will decline 15 percent this year but may rebound 6.5 percent in 2010. You do the math. How much better off might we be in recession-proof land?

Look at existing home sales: Down a whopping 32.6 percent in 2008, they will drop 30 percent this year before improving 12.5 percent next year.

Caveat: Assuming there IS a recovery.

“The dynamic Triangle should move forward in 2010, with employment, retail sales, and home sales growth among the leaders in the state,” Walden wrote. “Still, the area’s unemployment rate will remain uncomfortably high at over 8%, and while home sales will rise, a “buyer’s market” in real estate will persist.”

As bad as the retail and housing sales statistics are, what’s most striking is that unemployment figure. Who would have ever believed RTP unemployment would jump 130 percent in one year?

Reflecting on the most recent Fuqua Business School-CFO Magazine economic survey last month, Walden warned then that a jobless recovery appears to be in the offing. His own study bears out that a lot of people are still going to be out of work next year.

“The survey confirms what most economists have been saying - the economy is still in a recession, it will remain in a recession for the rest of 2009, but there's optimism the economy will improve - although modestly- in 2010,” he told The Skinny.

“Most recent economic indicators are still bad - however, they're ‘less bad’ than they were six months ago, so the rate of decline in the economy is slowing. Currently, it looks like the bottom of the recession will occur sometime near the end of 2009.

“However, growth prospects for 2010 are still guarded due to the unprecedented financial ‘hit’ households have taken - a loss of $14 trillion in wealth (22 percent of their total). The continuing need for households to rebuild their financial balance sheets, together with the expectation unemployment will remain high in 2010, will cause consumers to be very careful about their spending plans next year - even if the economic sky is brighter.”

North Carolina leaders have their work cut out in figuring out ways to rebound from the current mess – and strategizing on how to avoid a repeat. But Triangle leaders also face the same challenge. Many thought they were immune.

Welcome to reality, folks. It’s time to go back to the drawing board, figure out what worked, what didn’t – and take the appropriate steps to make sure the golden triangle isn’t tarnished this bad ever again.

The Skinny

WRAL Local Tech Wire Publisher and Editor Rick Smith dishes out tidbits from the local technology sector. Read more articles…