Posted on 01/07/2004 8:09:58 AM PST by TaxRelief
CARY
Economists and bankers predicted a modest economic recovery in North Carolina yesterday, saying that the state economy should grow 3.5 percent in 2004 with expansion in the tourism, banking, health care, pharmaceutical and technology industries.
But Gov. Mike Easley and State Treasurer Richard Moore warned that the state budget probably won't recover as quickly, especially if quotas on certain textile imports are allowed to expire as scheduled next January.
"Yes, we can transition. We're doing it. We're doing a good job of it," Easley told 600 business leaders at a forum sponsored by the N.C. Bankers Association and N.C. Citizens for Business and Industry, the state chamber of commerce.
"But we can't transition but so rapidly. We can't retrain workers but so rapidly."
Easley said that the state has continued to invest in public schools, community colleges and universities even during an economic downturn.
"We doggone sure can come out of this downturn a lot better positioned than we went into it," he said.
But as he has already done repeatedly, the governor attributed losses in the textile and furniture industries to trade policies adopted in Washington.
"I understand that free trade is helpful as it spreads across the country," Easley said. "But it's a disparate impact, a disproportionate adverse impact, in this state."
The state lost 32,000 manufacturing jobs last year, 25,000 of them in textiles and apparel, he said. But it still managed to post a net gain in jobs.
Easley said he wants officials in Washington to extend limits for three to four more years on imports of 30 textile products that are scheduled to expire in January 2005 under the Uruguay round of World Trade Organization talks.
"Every one of them will disappear a year from today, a year from this month. And if you talk to manufacturing executives, they will tell you that will be devastating to North Carolina's economy," he said.
"What I want to see them do is to keep those quotas in place at least three to four years ... to allow us to transition. You don't want to lose all those jobs in one year," he said.
But in Washington, he said, "they haven't been very receptive so far. They've pretty much sold out textiles."
Although state and industry officials persuaded the Bush administration to adopt limits on imports of Chinese bras and nightgowns, Easley said, he is wary of concessions that could be made in a new Central American Free Trade Agreement, or CAFTA.
Harry Davis, a professor of finance at Appalachian State University and an economist for the bankers' association, said that though the national economy will grow about 4.5 percent this year, it is expected to grow about 3.5 percent in North Carolina.
The state's unemployment rate is expected to decline only slightly, from 5.9 percent currently to about 5.8 percent, he said. And Davis, too, warned about the expiration of import restrictions on foreign textiles.
"We're still going to continue to have pockets of unemployment," he said. "North Carolina's economy is just going to grow a little slower than the national economy this year."
Easley applauded the state's No. 1 ranking in business climate by Site Selection magazine, as well as a $64 million biotechnology-training initiative and cash grants that the state can now make for job creation.
"We will use them. North Carolina is open for business," he said.
But he also warned that state revenues tend to lag behind an upturn in the state economy by nine to 12 months.
Revenues through the Christmas season were slightly ahead of the 3.5 percent growth on which the state budget is based, he said.
If revenues remain healthy through the critical Jan. 15 payments, Easley said he wants the General Assembly to cut the state's corporate income-tax rate - either by reducing the top rate of 6.9 percent or by exempting the first $25,000 to $50,000 that a business makes to help all businesses.
Even when revenues recover, Easley said, he also wants the state to live within spending limits he has proposed.
"We're on target with revenues this year. It's a little too early to tell, but when they do pick up again, I don't ever want to see the overspending of the '90s recur," he said.
Moore said that the recovery's prospects for the state budget are modestly promising. But with several hundred million dollars a year in projected growth in school enrollment and Medicaid health insurance, the budget will still be tight, he said.
"The bad news is the state of North Carolina still does not have two extra nickels to rub together. The good news is we're in better shape than 49 other states.... We still have resources to invest for tomorrow," Moore said.
"This is the first time in three years that North Carolina has not had to fill holes," he said. "But I don't think anyone wants to give the impression that a lot's going to be left over."
Listening to the talk about growth in some industries but not others, Fred Jones Jr., a restaurant owner from Mount Airy and the chairman of the Old North State Winegrowers Cooperative, said that most new jobs appear to be coming to metropolitan, rather than rural, areas.
"We didn't see the 2 million vacant square feet in textile manufacturing in Surry County alone getting filled in anything they said," Jones said.
Jones noted that the city seal of Mount Airy shows a piece of rock to represent the local granite quarry, a tobacco leaf, a chair to represent the furniture industry and a spool of thread to represent textiles.
Though the quarry isn't going anywhere, "75 percent of that great seal is either leaving or has already gone," he said. "Maybe part of that tobacco leaf can be replaced by a cluster of grapes. But we've got to find something to do about that spool of thread and the chair."
• David Rice can be reached in Raleigh at (919) 833-9056 or at drice@wsjournal.com
Seven days into the year is probably just a tad too early...Another no-brainer from our amazing leader.
On a more serious note, the statewide economic growth predictions are far too modest. As usual, innovation and new business ventures have been omitted from the list.
WHERE? HOW? *MAYBE* in construction - due solely to low interest rates. There's no chance the Gov had anything to do with it!
And is forced to invest in benefits for illegal aliens based upon the recent court ruling.
http://www.freerepublic.com/focus/f-news/1053196/posts
The first thing North Carolinians need to do is fire Liddy Dole.
"It takes five....
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