Anirban Basu Channels Edgar Allan Poe – Mixing Humor, Horror and Hope in Economic Update.
Posted in: PSA Partnership
When we think of the tiny island nation of St. Kitts and Nevis, it’s often when we’re dreaming of sun, surf, and fun during winter’s frigid months.
What we likely don’t think about is how the International Monetary Fund listed these two Caribbean gems among the top 20 fastest growing countries in real GDP growth in 2014. Why so much growth? You can attribute it to banking policies there that have attracted mega, tax-sheltered deposits over recent years, boosting the wealth of the tiny island nation, said economist Anirban Basu at a recent and highly thought-provoking PSA Partnership event on the state of the economy.
Basu, chairman and CEO of the Sage Policy Group, shared an economic analysis on a global level, as well as in the U.S., Maryland, and the Baltimore/DC metropolitan area in a presentation highlighted with humor and jokes. His talk was named after the Edgar Allen Poe story, “The Pit and the Pendulum,” as a way of keeping real what he jokingly likened to a potential horror show, with signs of growth and progress providing bright spots along the way.
Using the Great Recession — and its ongoing aftermath — as a checkpoint, he walked the crowded room of business leaders and professionals through the world’s projected economic outlook. Here are some of the key takeaways.
Primed for growth
His graphs and charts showed how global players like India, China, developing Asia, Sub-Saharan Africa, Central and Eastern Europe, the U.S. and the U.K. are projected to lead the way in output in 2015. India, fueled by strong growth in services, in particular, leads the pack with a projected 7.5 percent in growth. All of this growth surrounds a world population of about 7.3 billion people — a figure expected to grow to close to 9.5 billion by 2050.
U.S. trailing behind
In the U.S., the sluggish job market and wages, as well as the current rollicking early presidential landscape have trickled down to cause a certain amount of wariness and discontent in personal and family spending patterns. “There’s a lot of disenchantment in America — there’s a lot of disagreement. We can see this in the primary season, both on the Republican and Democratic side,” Basu said.
Earnings and income for some, he added dryly, remain in the dungeon, as household incomes for full-time US workers have grown just 2 percent. Amazingly, the median income earnings of workers age 16 and over in the first two quarters of 2015 when adjusted, Basu said, were not distinguishable from what they were in late 2001. That has left many families and individual earners shaking their heads in confusion. “People will tell you that the recession has not ended yet,” he said, referencing a 2014 national survey showing that 57 percent of Americans think the nation is still in recession.
It’s all part of an ongoing mixed bag in our economic times, Basu explained. On the plus side, the U.S. dollar is stronger this year, with a dollar buying 120 Japanese Yen in 2015, compared with only 100 Yen at one point last year.
But on our shores, Basu also showed a slide of the recession’s negative impact on wages, and salaries, and a map of recovery state by state as of July 2015. While some states were still at risk, almost half of the states were expanding. Also, on the bright side, he cited periods of rising stock prices (including recent historic highs) but also cautioned that the substantially depressed price of oil could affect the market.
Slow growth in jobs and housing nationwide
Keeping with the horror show theme, Basu pushed on. He called the slow job growth “Invasion of the Body Snatchers” and the housing market the “Nightmare on Elm Street.” “Job growth increased just 2.5 percent in August 2015”, he said, and “housing sales grew a meager 2.2 percent over the course of the summer” — in part due to high student loan debt by prospective young home buyers, compounded by fears over slow job growth and sluggish wage increases.
“Job growth is slowing,” Basu explained, adding that figures show the U.S. posted 173,000 new jobs this past August, compared with an average gain of 247,000 jobs a month in the 12 months prior. In some sectors, profit margins are “razor thin,” he said, and still wracked by the recession, making it hard for many companies to hire new employees. Jobs grew fastest between August 2014 and August 2015 in the professional and business services, education and health services, trade, transportation and utilities, and leisure and hospitality, Basu said.
Overall, he called the nation’s economic future a work in progress, predicting “moderate economic growth for the year ahead.”
Jobs and housing growth in Maryland
In Maryland, the economy has experienced fits and starts. The 2 percent job growth from August 2014 to August 2015, mirroring the U.S. growth, showed gains in education and health services jobs, followed by employment jumps in government, professional and business services, and leisure and hospitality. A move by voters to elect Republican Gov. Larry Hogan last November was one way state taxpayers pushed back, Basu said, saying, “enough is enough” to the slow job growth due to heavy taxation.
Voters in other states like Illinois and Massachusetts followed suit. “More and more of the electorate care about the taxes that they bear, because the taxes that they bear help determine where they actually live,” Basu said.
But all politics are local, and with Maryland’s economic picture still in flux, much work remains to be done in the coming year. The state’s unemployment rate is listed at 5.1 percent, the 24th highest in the U.S. There is a big focus on business development and growth in the state these days. “And business growth here is not as good as it used to be,” Basu said.
As chairman of the Maryland Economic Development Commission, appointed by Gov. Hogan, Basu said he advised the governor that the corporate tax rate (now 8.25 percent) is stifling growth and should be reduced. Time will tell if that move ever gets the blessing of the General Assembly in Annapolis.
A surging rental market will continue to affect the housing sales market, Basu said, and that will lead to more uncertainty. Why the rise in renting? According to Basu, it’s fueled in part by the millennial generation’s reluctance to owning a home after seeing their parents suffer from the large decline in home values (and subsequent mortgage crisis) that swept the country starting in 2007. However, this trend could change once this generation starts having children.
“The ‘Tell-Tale Heart’ here is that we are now in the middle cycle stages of recovery,” Basu said.
We’re showing progress but have plenty of work on the road ahead.
To see how Basu’s economic outlook compares to his predictions last year, read “Where Is Our Economy Headed?” Also register for our next PSA Partnership event, “Invisibles – Celebrating the Unsung Heroes of the Workplace” seminar helps you understand the low-profile, yet critically important professionals at your organization and provides you with valuable practices to manage, motivate and retain them. It takes place Jan. 26, 2016 at 8:30 a.m.