By John Schaffner
“What we have gone through between the last part of 2007 and the last couple of months is the most pronounced downturn in the economy since the Great Depression,” economist Dr. Roger Tutterow told an overflow crowd at the Sandy Springs/Perimeter Chamber’s Bagels & Business meeting Oct. 26.
“I believe that when the history of this downturn is written, we will decide the recession actually ended in July or August of this year,” the Mercer University professor stated. “I believe right now we are in the very early stages of economic recovery.”
Declaring that Sandy Springs and Perimeter Center are “the hottest places for new businesses to come and existing businesses to expand,” Tutterow said, “Small business will likely lead us out of the recession” and he predicted Atlanta should do at least as well as other cities in its recovery. However, he said job growth is not likely until 2010.
Among the other predictions the economist made were:
• In the first quarter of 2010 the Fed will begin raising short-term interest rates again—gradually.
• As many banks will be closed in 2010 as have closed in 2009 (106 have closed in 2009 up through Oct. 26).
• For most of 2010, lending by banks is not likely to be much better than it is today.
• Tax rates will be going up. At the end of 2010, the marginal tax rate will go to 39.5 percent. Tax rates on capital investments will go up. If you die in 2010, the estate tax will be zero. But, unless legislation is passed, if you die in 2011, the estate tax rate could be 55 percent.
Tutterow explained that the last time he spoke to the group in the early March of 2008, “we were beginning to see a drop in the non-farm payroll, indicating the early signs that the recession was coming. When we came to September of last year, the economy dropped off a cliff.”
He said three things led to this recession: “Higher energy prices, the worst credit crunch in a generation and the 50-year flood in residential real estate [inventory].”
He said everyone understood in the late 1990s that oil had gotten too cheap. However, “I don’t think anybody expected crude oil to rise to $145 a barrel as it did in the spring of 2008. That by itself started to cut into discretionary spending in the economy,” he explained.
“Had we stopped right there, it is likely we would not have had the depth or duration of downturn,” he stated. Unfortunately, in the summer of 2008, he explained, “We began to see the effects of the credit crunch hit the consumers.” He said the challenge remains in our banking sector. “Concerns about real estate have mounted and put regulators in a tough position in oversight of banks.”
Atlanta was one of the hottest real estate markets in the country, Tutterow explained, and states which led in real estate construction led in jobs loss. In terms the downturn in real estate, “the good news is that we bottomed out earlier this year.”