Editor’s note: Dr. Harry Davis, a professor of banking at Appalachian State University, is the economist for the North Carolina Bankers Association.

BOONE, N.C. – The national economy is getting close to the end of the longest recession in the post WWII period. The recession has not only had a long duration, the decline in GDP has exceeded the average decline of previous recessions of about 3 percent.

The recovery following this recession will be different than those in recent memory. GDP growth has often been in the 4-6% range for several quarters on an annualized basis after recent recessions. This time the rate of GDP growth will be much slower. Expect the economy to experience positive growth this quarter and growth of about 2-2.5% in the fourth quarter.

There are several reasons for the slower rate of GDP growth in the expansion. First, consumers have experienced a recession that has changed their view about economic security. Unemployment is not only high and rising but the number of people unemployed is at a record level. The length of time people are unemployed is also at a record.

While we expect job losses in the manufacturing sector, the job losses this time have occurred across virtually every sector of the economy. White collar workers who thought they were immune from large lob losses are struggling with unemployment benefits. Even the professions are losing jobs.

With high unemployment, consumers’ confidence has been shaken. Consumers are much less likely to pile on debt and fuel consumer spending growth as in the past. They have been reducing debt levels leading to the highest savings rate in 14 years.

Recessions are a natural and essential part of an economic cycle. This recession will end. They occur when excesses lead to bubbles which ultimately must burst. The latest expansion produced the greatest credit expansion in history which created the housing bubble. During this decade, housing prices increased faster than incomes. Government agencies and part of Wall Street supported subprime loans allowing households to buy houses they could not afford. As is true of all bubbles, the housing bubble had to burst which it did by the end of 2006.

There are some positive signs for the economy. Consumer confidence has risen from the record low level of a few months ago. The index of leading economic indicators has risen for three consecutive months through June. The Federal Reserve has moved aggressively to lower mortgage rates which has created a refinancing boom. The stimulus money is finally beginning to reach the economy. Clearly, the economy is starting to turn.

Our state economy is suffering much more than the national economy. Our state has a large manufacturing sector which has been severely hurt by the slowdown in world trade. The state unemployment rate, which in June was the eigth highest among the states, started from a higher level in this expansion that the last two. We can expect our unemployment rate to rise to 12 percent soon and continue to rise into next year.

About the NCBA: (NCBA) brings together all categories of banking institutions to best represent the interests of this rapidly changing industry. With 144 members, it has helped all North Carolina banks support their communities since 1897.