Area economic outlook 'stellar'
Housing market, full employment among highs for Southeastern N.C.

By Bonnie Eksten
Business Editor
WilmingtonStarNews

"Housing bubble? Not here. Unemployment? Not a problem. Ray Owens, a Fed economist, addressed business and political leaders Thursday at the annual economic forecast sponsored by RSM McGladrey, The Greater Wilmington Chamber of Commerce and the Committee of 100. The senior economist with the Federal Reserve Bank of Richmond recapped 2005 and laid out the economic picture for 2006 before a full house. Owens told the invitation-only crowd that “2006 looks stellar.”

This is the 14th year a speaker from the Richmond Fed has ventured this far south to discuss the economic outlook for the year. Owens has a fairly good record for economic prognostication. Last January he said the housing market in Southeastern North Carolina was solid. It still is. For example, local real estate agents said there was a shortage of million-dollar properties. By summer, the Wilmington Regional Association of Realtors reported record-high sales numbers and prices for single-family homes sold in June. He said the Fed’s short-term interest rates would continue to rise. They did. In a process that had started in the summer of 2004, the Fed continued to raise interest rates 13 times, reaching 4.25 percent by the end of 2005. Owens predicted the area’s economy would grow. It has. General Electric plans to expand both its nuclear and jet engine business here. Fortron and DAK Americas each will invest $65 million in new construction. PPD is building a new world headquarters and says it will add another 1,000 workers in Wilmington .

Economists, he said, are paid to worry, but there wasn’t a sour note sounded when it came to this year’s economic predictions, especially for the greater Wilmington area.

Owens said the local outlook for this year includes: HOME SALES: This area is the top of the food chain, and as long as the underlying fundamentals are strong, there is no housing bubble. Sales should level out this year. But because there is a limited amount of lots with water views, supply and demand will continue to fuel sales. The housing market will continue to grow but won’t be as robust as last year as prices level off rather than drop. Coastal areas will still attract homebuyers, especially wealthy baby boomers, who often can pay cash for vacation homes on the water.

INFLATION: With about one in four households living on retirement and/or fixed incomes, inflation is a source of concern for residents of Southeastern North Carolina . With the exception of energy prices, inflation is under control and within the Fed’s “comfort zone.”

JOBS: Job growth in this part of the state mimics other hot job areas, such as Northern Virginia and the District of Columbia . Wilmington has statistical full employment – almost everyone who wants a job has one. Employers are concerned about finding enough workers to fill jobs. If job opportunities flatten in home construction, other businesses that are growing will be able to absorb affected workers.

MANUFACTURING: North Carolina ’s reliance on manufacturing jobs has hurt its overall employment picture. Because manufacturing is the weakest sector in the economy, the state’s unemployment rate has been higher than the U.S. rate. That is changing as the influx of venture capital into North Carolina business is on the upswing, and the high-tech sector is beginning to show signs of life again.

CONSUMER SPENDING: As long as consumers feel confident about the economy, they will spend. North Carolina residents are showing a great deal of confidence, outspending the rest of the nation."