Don’t buy into fears that China’s economic issues will inflict major pain on the U.S. economy.
That was one of the admonitions that economist Brian Wesbury delivered Wednesday to a crowd of about 800 business executives at the 14th annual Economic Forecast Forum sponsored by the N.C. Chamber and N.C. Bankers Association.
Wesbury noted during his talk at the Sheraton Imperial Hotel that “our exports to China right now are $100 billion a year.”
“That’s 0.7 percent of our GDP,” said Wesbury, who is the chief economist at financial services firm First Trust Advisors. “China could shut off tomorrow and we would have still grown last year – about 1 percent growth instead of 2 percent, but we still would have grown.”
Wesbury complained that since 2009 there have been more than 250 “black swans” – unexpected events that were viewed by some as harbingers of major problems for the U.S. economy. At the same time, however, Wesbury subscribes to the notion that the economic recovery from the latest recession has been slower than in the past because the federal government “has gotten too big.”
Government spending per person, excluding funds allocated to defense, has been growing much faster than the rate of inflation since the George W. Bush administration, he said.
“In fact, we’re spending $800 billion more per year right now than we would have” if the federal government has merely increased spending in line with inflation, plus adjustments for population growth, Wesbury said.
“You want to know why the middle class is hurting?” said Wesbury. “You want to know why wages are stagnant? ... It’s because the government is so big.”
Other highlights from Wednesday’s event:
▪ Gov. Pat McCrory, during a Q&A session with Tim Boyum of Time Warner Cable News, said some parts of the state are seeing a “skill shortage at this point in time – primarily in IT, construction, welding, electricians, mechanics, and also health care, especially nursing ... That is one of our great challenges in this rebound.”
▪ McCrory also talked up the $2 billion bond referendum that will go before voters in March.
“The last bond referendum that North Carolina had was in the year 2000,” McCrory said. “In that 15 years we’ve grown by 2 million people. As one speaker said, it’s like Nebraska moved to North Carolina.”
The referendum “ties directly into our skills gap,” McCrory said. “We have a shortage of engineers, and yet some of our science facilities, our engineering facilities, are 1950s facilities. They’re an embarrassment. ... Our engineering building at UNC-Charlotte, built in the 1950s/early 1960s I believe, I went up to the roof and I was afraid I was going to fall in. The maintenance on that building is costing us more than the building is worth, per year.”
▪ In the wake of the incentives package for recruiting industry passed by the legislature last year, McCrory said, the state is “going to go after the big dog in manufacturing, which is either aerospace or automobiles.”
He noted that the state has three or four sites large enough to be attractive to the automotive industry.
▪ “Technological unemployment” – jobs replaced by technology – continues to loom as a major problem facing the state, said N.C. State University economist Michael Walden.
“Now it looks like we’re entering a new phase where technology is able to do more and more things – not just rote tasks but actually some cognitive tasks,” he said. For example, he noted, there’s now software that can do paralegal work.
That will put increased pressure on the higher education system to “make it more seamless for people to, five or ten years into their occupation, get totally retrained. ... And, secondly, the higher education system needs to stay attuned to these rapid changes and what occupations are falling by the wayside.”
▪ Walden said one positive in 2016 is likely to be an uptick in household formation. “I think we’re going to see some of those college grads in their parents’ basement start coming out of the basement and go out and rent a place,” he said. “That sparks a whole host of spending. I think the labor market is now at a level that’s going to motivate more of that.”