I recently had the privilege to attend a seminar where economist Dr. Donald Ratajczak spoke on his insights into our economic future. Dr. Ratajczak is a noted economist, the former head of the Georgia State University economic forecasting center and a noted worldwide lecturer. His opinions are in demand by the media and he is often sought after by major television networks for his thoughts on the economy.
Below is a summary of what Dr. Ratajczak sees for our economy in the near future:
Banks are reeling from the bad loans that were made over the past few years. Many lenders are surprised to find out how bad their portfolios really are. The banks feel that federal regulators are looking over their shoulders. How do the banks keep the regulators at bay? How do they improve their loan portfolios? They need lend…to good qualified borrowers. Then the banks will have more good loans in their portfolios.
Are we in an economic recovery? Yes, but it is not the traditional recovery that is usually led by the housing sector. Housing, in this recession, is a laggard. We have a two to three year inventory of unoccupied residential houses. However, by 2013, the inventory should be back to “normal.”
The recovery is slow because the banks won’t lend. New loans are DOWN eight per cent (8%) from this time a year ago. However, deposits are UP eight per cent (8%) from last year. When lending is down and deposits are up, the banks have money. They have plenty of money to lend if they would do so.
The banks need to change their manner of lending in order to get better loans into their portfolios. With a required credit score of 700, only one-third of the population can qualify for a loan. If the criteria were lowered to 675, then forty-five per cent (45%) of the population could qualify for a loan.
The Jobs Report for February showed a loss of thirty thousand jobs. However, sixty-four thousand of those job losses were in construction and government. State governments are letting people go to save money; state governments are experiencing large deficits and the fastest and easiest way for government to save money is to cut jobs. If the construction industry and government jobs are removed from the report, we actually had an increase of thirty thousand jobs last month. This trend should continue into the future.
Temporary jobs have also been increasing for the last five months. This will lead to job growth as temps are hired and made permanent workers. We should see continued job growth in March, April, and May –JBW 3/5/10