Local economic analysts give perspective on recession

By DAVID MOON, Moon Capital Management, LLC
December 20, 2009

A week ago, President Obama’s Chair of Economic Advisors Christina Romer and the Director of the White House’s National Economic Council Larry Summers appeared on various Sunday new shows. On NBC’s “Meet the Press” Romer was asked if the recession was over and replied “of course not.” Summers was on ABC, observing that “everybody agrees that the recession is over.”

So I decided to question another group of economic analysts: some normal people around Knoxville.

Crystal Newman and Kaylyn Gates work at the Pilot station at the Forks of the River. Crystal sees a lot more FedEx and other freight truck traffic than a year ago. Kaylyn says “the economy stinks, but it’s a lot better than earlier in the year.”

At food bank Second Harvest, Elaine Streno sees things differently. “My personal observation is that we are worse off than we were a year ago. Our requests for food continue to increase each month.”

Perhaps security guard Tom Green understands the difference in Streno’s and Newman’s opinions. He notes that gas and diesel prices bounce around like yo-yos, but food prices never fell after oil dropped from $140 to $70 a barrel.

Randall Robbins lives in a south Knoxville apartment, although for much of the past two years he lived on the streets and in a tent in the woods somewhere in Vestal. Randall says that “since the beginning of time people have found ways to make money and lose money, regardless of the state of the economy. Now is no different.” He ascribes the difference in those people to how and what they think.

Cody Sullins is a graduate student at the University of Tennessee. He will start at center for the Vols in the Peach Bowl. He thinks that the announcement that third-quarter GDP actually increased has an emotional impact on consumers, encouraging them to believe that the worst is over. He isn’t convinced, however. “The positive aspects of the economy may be brief and probably will not continue very far into the future without more negative periods ahead.” Sullins also notes that lower interest rates may stimulate the economy in the near term, but a prolonged period of artificially low rates could increase future inflation.

Unlike his twin brother, Cory (also a UT grad student and offensive lineman) thinks the economy really is stronger than six and 12 months ago. He doesn’t believe that the current uptick in consumer confidence is false or fleeting. He acknowledges that unemployment is still above ten percent, but that most housing markets have stabilized and the stock market has enjoyed a robust recovery. “If two of those three indicators have improved, I would say that the economy is stronger now than six or 12 months ago.”

Offensive linemen are clearly the smartest guys on the field. You would never get that answer from a cornerback.

Finally, I asked my kids if the economy was better now than a year ago. They said they would let me know after Christmas.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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