Since the "Great Recession" hit in late 2007, we've lived through the greatest economic downturn since the Great Depression. This is, of course, no secret to the business community. It also is an ongoing economic trauma for those who lost their job and have yet to find another.
Many in our community have been fortunate enough to find work, but at substantially less pay than that of the job they lost as a result of the recession. With the state's unemployment rate at 9.6 percent, and Randolph County's unemployment rate in December at 11.4 percent, many are wondering when the "recovery" the politicos are telling us that's under way will catch up with them. Keep in mind these numbers do not include those who have depleted their unemployment benefits and/or those who have given up looking for work.
I was interested in finding out just how badly our local economy was affected by the recession and went to the CEOs of two of our local banks and an investment broker for information. Here's what they had to say.
According to T. Richard Harvey, president and CEO of Mountain Valley Bank, one of the hardest hit industries in our area and that is still facing challenges is the lumber and timber industry.
"These industries continue to face challenges due to the nationwide housing situation," Harvey said. "Although our local housing market is not as healthy as it once was, it is not as bad as many locations throughout the country. Our market prices never got completely out of control as they did in many places, so the effects of the recession in this area were not as pronounced."
Harvey also indicated that the unemployment situation has certainly had an adverse effect on housing demand locally, as well as nationally.
"This is, and continues to be, an area, as well as national, concern," he said.
We often hear the talking heads on television comparing our personal savings rate with that of China and other countries, and that comparison isn't encouraging. It does appear, however, that we in this country are beginning to realize the importance of saving, and the savings rate is beginning to show an increase.
According to the U.S. Department of Commerce, our national - including our local - average savings rate remained fairly constant at about 10 percent from 1952 to 1982. Then it stumbled over a cliff. It continued to decline reaching near zero percent in 2000. In 2004, the savings rate increased slightly to around 4 percent then dropped again to near 1 percent in 2007. Since then, it has increased to today's rate of nearly 6 percent.
These numbers are based on the U.S. Department of Commerce Personal Flow of Funds Account. According to the U.S. Bureau of Economic Analysis, personal savings, which is disposable personal income less personal outlays, was 5.3 percent in December as compared to 5.5 percent in November.
I was unable to obtain local savings percentage rates, but Harvey's comments reflect the national trend regarding savings.
"The recession has caused a renewed awareness in the need to save and to make prudent credit choices among consumers," he said. "However, this is tempered by the ability to save based upon employment security, expendable income and the need to pay off existing loans in order to keep credit scores as high as possible."
Seeking information on the investment market, I turned to Clifford Marstiller, the co-owner of Innovative Investments.
"The markets affected our clients' investments as it did anyone who was exposed to the securities markets during the (recession)," Marstiller said. "The unusual thing about the decline is that it negatively impacted not only stocks but bonds as well.
"Fortunately," he said, "we have had a significant rebound since the market lows of March 2009. The S&P 500, which is the benchmark we use to measure performance of the broad stock market, was up about 15 percent in calendar year 2010 (with dividends reinvested). For someone who had the fortitude to invest at the market low on March 9, 2009, their return through Dec. 31, 2010, would have been 86 percent. Unfortunately, not many folks possessed that fortitude. Lately, clients are becoming cautiously optimistic and slowly coming back in the markets.
"Recently, I get the sense that folks are looking at ways to rein in spending and pay off debt," Marstiller said. "I think this is a positive for individuals and for the country. I'm reading in various sources that our national savings rate has been improving since the onset of the 'Great Recession.'"
Citizens Bank of West Virginia CEO and President William T. "Bill" Johnson said, "The effects of the recession have shown up at our bank by way of decreased income. The recession caused a downturn in lending activity, it has persisted especially in the commercial arena, and, as a result of that and combined with some defaults that we've had, has dented our income. It hasn't damaged our bank in terms of its capital position or in terms of being a strong bank, but the recession has caused us to miss our budget for the last two years.
"That, of course, has an impact on what we can pass on to our shareholders," he said.
Johnson said that he believes most banks in West Virginia are experiencing the same recessional effects. He explained, "(Recently) we attended a session in Charleston where the West Virginia bankers hosted the Legislature for the annual reception. I would say that there were 40 or 45 West Virginia bank CEOs down there. Every banker I talked to was saying the same thing - they are seeing a decrease in small loan demand, decreased earnings and most, if not all, are working on some troubled assets."
When asked what he thinks we need locally for our economy to grow, Johnson said, "We need more jobs; they need to be more broad based - a wider and more diversified job market. I know that's a tough nut to crack. Are we going to crack it in this economy? No, obviously not. Going forward into the future - five to 10 years from now - I think that's what we need to be looking at. We need to try to attract a broader, more diversified industry base so there are simply more jobs. Until that happens, this economy is not going to grow by any large margin." To accomplish that goal, Johnson said the initiative would have to start at the state level. "I think the entire state of West Virginia has to become a more attractive place to do business through smaller government, less taxes, less bureaucratic red tape and an attitude that is more friendly to business - an attitude that's friendlier to the entrepreneur - one where people are less afraid of risking either their capital or borrowed capital," he said.
Johnson also said that he thinks the stimulus package was a failure. "My opinion may be in the minority, but I believe as time moves forward, as we look at the situation five or 10 years down the road, I think history will prove that the stimulus package was almost a disaster. Instead of helping, I believe it prolonged the recession."
From what I'm hearing and reading, I am inclined to agree with him.