‘Less Worse Is the New Excellent’ of Economy

The economic recovery will look like a “W.” That’s the opinion of well-known regional economist Anirban Basu, who gave a wide-ranging analysis of the downturn and the tentative steps toward recovery yesterday at a breakfast event hosted by the Baltimore Business Journal called “The Road to Recovery.”

Basu, CEO of Baltimore-based Sage Policy Group, said the worst of the economic crisis is behind the region, and he expects the regional economy to improve through mid-2010 and outperform the nation.

Stimulus spending and business activity related to the Pentagon’s Base Realignment and Closure process will prop up the region, Basu added, but it’s too soon to tell if inflation will rear its ugly head—and he has “big questions” about what the economy will look like in 2011.

That’s because, as stimulus spending presumably winds down, available credit will still be tight, interest rates could be on the rise, and governments, grappling with tapped-out coffers, might very well be looking to raise taxes.

In the face of all that, Basu said, “the private sector will need to step in and drive the growth ball down the field.” But it’s not yet clear if the intestinal fortitude exists in the private sector to do that.

Hence, the up-and-down “W” symbolizing Basu’s view of what could be an up-and-down recovery.

As with so many aspects of this Great Recession—sales and profit goals, expansion plans, retirement strategies, job security, consumer confidence—much of Basu’s analysis centered on recalibrating expectations.

“Things are getting less worse. And less worse, of course, is the new excellent,” Basu said, his trademark sense of economics humor on full display for the 120 breakfast attendees.

That observation was made specifically in reference to the jobs picture, and Basu pointed out that, of the 20 largest metropolitan areas in the U.S., Greater Baltimore has the third-lowest unemployment rate, at 7.7 percent. The pace of job losses nationally over the past year is twice that of Maryland, Basu added: “We are starting to get a little bit healthy.”

However, rising unemployment will continue to hurt the commercial real estate industry. And manufacturing job losses across the country—1.5 million in the last 12 months—will continue to block a crucial “gateway to the middle class” for some skilled workers, further hampering economic recovery. How regions react to that shift will be key to building sustainable economies.

“Yes, it’s true, manufacturing jobs will come back—just not in this country,” Basu said.