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Optimism
2012 for
We asked experts about the prospects for nine different economic sectors in the new year. The consensus: A surprising amount of cautious optimism that although the economy may not have turned the corner yet, the corner might be coming into view. Here’s the outlook, segment by segment:
Finance The good news: Banks, credit unions and other financial institutions that have weathered the worst of the recession have likely done so thanks to prudent and careful decisions, and now those institutions are poised to take advantage of the economic upturn, when it finally comes. Financial institutions have cash to loan, and are making loans to business people with sound business plans and consumers who are good prospects for timely repayment. The bad news: It’s likely that the shakeout in the sector still isn’t quite finished: Some banks may close in 2012 and a Eugene credit union recently closed its doors. And, ironically, an improving economy could fuel liquidity issues in institutions in the next couple of years as investors take their money out of the safe havens of banks and credit unions in search of higher returns. The uncertainties: It’s still unclear what impact financial reforms like the Dodd-Frank legislation recently passed by Congress will have on banks and credit unions. And, although consumer confidence appears to be on the rebound, it still could be shaken by any number of events, both in the United States and abroad. – Mike McInally
Government and education The good news: Enrollment increases at Oregon State University are helping to bankroll an increase in the ranks of faculty and staff members. OSU projections call for the growth in enrollment to slow, but to continue at a 2 to 3 percent pace for the next few years. The bad news: Although it tends to be obscured by OSU’s hiring boom, other branches of local government likely will be looking at shedding jobs over the next year or so. The Corvallis School District, for example, is looking at a budget shortfall of more than $4 million for its next fiscal year, and would appear to have little option but to lay off workers. The same is true at other mid-valley school districts, and city and county governments as well. The uncertainties: Governments have been shielded from the worst of the budget cuts by a number of voter-approved levies. But those come up for approval every few years, and government officials worry that voters will start to reject those levies – which would trigger deeper personnel cuts. And any year with a legislative session – and now, that’s every year in Oregon – brings some uncertainty. – Mike McInally
Retail The good news: Mid-valley retailers report the last few years have showed improvement. While optimism is guarded, steady holiday sales bode well for the economy. Hiring is up and spending local has increased. The trend to stay local and shop local has resulted in more event participation and an increase in business. Mid-valley business associations report there is a trend to buy quality goods and retailers catering to higher quality goods are seeing positive sales. The bad news: In an election year, there are many uncertainties and unpredictable events. Dubious information flying around can cause unease while new regulations and tax burdens will raise questions. The uncertainties: It is impossible to predict human nature. If people aren’t feeling secure, they won’t part with their money. While many hope for a better economy and some say things are improving, shoppers still hold tightly to their wallets waiting for a sign that things will change for the better. – Maria L. Kirkpatrick
December 2011
Agriculture
Construction and real estate
The good news: Mid-valley farmers continue to diversify their planting selections away from what had been primarily grass seed only. Wheat, clover seed and even hazelnuts are being added to the mixture. The backlog of grass seed that has sat in warehouses due to anemic new home sales and cutbacks in over seeding by the golf industry, is slowly decreasing. The bad news: The number of acres of wheat grown in the midvalley continues to increase and prices have remained relatively strong. But a long, cold, wet spring decreased wheat yields in some case by as much as 50 percent over the 2010 crop. The uncertainties: Prices for some varieties of grass seed have begun to come back, but how far they will go is the question. Also, weather has affected wheat yields in other parts of the world, causing U.S. prices to fluctuate. Relatively high crude oil prices have resulted in diesel fuel prices approaching $4 per gallon and fertilizer prices of $600 to more than $800 per ton.
The good news: As the economy continues to recover from the burst of the housing bubble, the brightest spot on the horizon in the world of mid-valley construction and real estate is multifamily housing. Expect to see continued demand for rental housing. The neutral news: Other than that, 2011 was a fairly flat year for construction and real estate. Albany Realtor Dave Pautsch said that since area house prices began declining in August 2007, things have stabilized in the mid-valley. Few if any builders are putting in new subdivisions or building spec homes, but the inventory of unsold houses is starting to decline. Realtors consider that when the average listing sits on the market for more than six months, it’s a buyer’s market; when properties are snapped up in less than six months, it’s a seller’s market. Currently, the average is 5.27 months for Corvallis, 6.61 for Albany, and 6.46 for Lebanon.“I’d say it’s a fairly neutral market,” Pautsch said. Commercial Realtor Gary Pond said that it’s been a flat year for commercial real estate. Some stores, such as JoAnn’s Fabrics in Corvallis, moved to larger, newer spaces, but such movements leave behind holes to fill at the old storefronts. “It’s really been like musical chairs,” he said. “There’s no major net gain.” The uncertainties: The free fall has stopped, but don’t expect to see a housing boom anytime soon.
– Alex Paul
– Jennifer Rouse
Health care The good news: In July, expect a major healthcare transformation as a legislatively imposed deadline arrives that has given health care organizations a 12month period to form coordinated care organizations, local organizations with networks of providers that offer preventive care. The organizations will aim to focus on prevention and early detection. Overall, hiring should continue in the sector as demand rises. The bad news: Health care costs are rising as reimbursement for services is reduced. In July, changes in the state budget take effect that will reduce by 20 percent reimbursements made to hospitals for care of patients with state-funded medical coverage. The uncertainties: There is no way to predict how these changes will impact the economy. Less money coming in to hospitals will have an impact but at the same time new jobs in health care likely will be created. 2012 is shaping up as another transition year, and the U.S. Supreme Court’s ruling on President Obama’s Affordable Care Act adds another layer of uncertainty.
Manufacturing The good news: Chris Scherer, director of the Oregon Manufacturing Extension Partnership, predicts growth across industries. “Most of the companies that have made it have at least a reasonable recovery gain plan,” he said, adding that most of his clients were relatively optimistic. In the area of technology manufacturing, Bruce Laird of the Oregon Business Development Department described himself as quite optimistic.“The numbers are very optimistic and certainly business is picking up.“ In Linn County, metals manufacturing may receive a boost due to increased demand for aircraft, said Will Summers of the Oregon Employment Department. However, he does not expect huge growth. The bad news: Benton County won’t be seeing much, if any, growth in wood-product manufacturing, said Summers. Overall,“business is still nowhere near where it was, but it doesn’t seem to be sinking any further except in isolated cases,” Scherer said. The uncertainties: No one can predict exactly what 2012 will bring, and different industries will see different results. Scherer added the stipulation that companies actively working to improve their productivity are more likely to find success in the coming year. – Jen Matteis
– Maria L. Kirkpatrick
Timber/wood products
Dining and tourism
The good news: Housing starts are up compared to the last couple of years at 680,000 units, but still well below the normal standard of 1.3 million units per year, according to Jim Geisinger of Associated Oregon Loggers.“It’s better than what we’ve seen in recent years, but it’s still a far cry from the really good years when there were 2 million starts,” Geisinger said.“And, there’s an uptick in home repair and remodeling, so that market has improved a bit.” Other good news is that investor groups are buying foreclosed homes, remodeling them and putting them up for sale. “It’s not new housing, but at least this should help take some of the backlog out of the market,” Geisinger said. The bad news: The market has been shored up by the shipment of raw logs overseas, because domestic demand is so poor. But that means new jobs in wood processing aren’t being created. The uncertainties: How long overseas demand will continue and whether the European debt issues will balance out.
The good news: Mid-valley tourism was strong in 2011, and while the dining business isn’t back to prerecession levels, local restaurateurs are optimistic. Surging attendance at local festivals and continued bookings for conventions and conferences contributed to a good year for tourism. Corvallis and Albany both reported increases in the amount of money they received from room taxes in 2011. Dave Gilbert at Visit Corvallis said that Oregon State University sporting events and conferences played a big role in those numbers, as well as the area’s emerging role as a bicycling center. Corvallis restaurant owner Iain Duncan said times have been tough on restaurant owners, as food prices rose dramatically and the failing economy made diners less likely to eat out. Partly in response to such pressures, Duncan and his wife, Tonya, closed one restaurant, Terzo, and converted their French restaurant, Le Bistro, into the lower-priced Brew BBQ. But things are looking up, Duncan said. Albany restaurant owner Matt Bennett had to make changes to keep his restaurants vital as well – he and his wife, Janel, sold Boccherini’s coffee shop and added a retail wine component to their Italian-American restaurant, Clemenza’s. Now, Bennett said, his restaurants are doing better than they have for the past few years. The uncertainties: If fuel prices go up, that could dampen some of the optimism here. But the overall trend appears to be slightly upward.
– Alex Paul
– Jennifer Rouse
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