Global economist says recession fears are subsiding

For the past five years, Manuel Balmaseda has not wavered when asked about the possibility of a recession. His answer has always been the same.

“The truth is we’ve been postponing a recession every year for the past five years,” he joked.

Balmaseda, the chief economist for Mexico-based building materials corporation Cemex, made the comments during his remarks Thursday (Jan. 30) at the 26^th annual Business Forecast Luncheon, coordinated by the University of Arkansas Sam M. Walton College of Business and its Center for Business and Economic Research (CBER).

“Recession fears are subsiding,” Balmaseda told a luncheon crowd of approximately 1,100 inside the grand ballroom of the John Q. Hammons Center in Rogers. “As a matter of fact, when you look at the mood, those feelings have been deteriorating through the summer and continue getting better. It seems like we are less worried. And most [economic] forecasters are saying the same thing.”

In discussing the global economy, Balmaseda said there is a slowdown in effect, but that isn’t the same as a recession. If and when one manifests, he said, it would be a “mild” one.

“The global economy is not doing that poorly,” Balmaseda said. “It’s slowing down, but that’s nothing new. All economies are slowing down, and last year we had more of that.”

Balmaseda was one of three economists who spoke to the group joining Constance Hunter, the chief economist for KPMG, and Mervin Jebaraj, director of the UA’s CBER. Murphy Oil Corp. chairman Claiborne Deming also spoke briefly and moderated a panel discussion to wrap up the event.

“It’s important to use good data to make better business decisions so we are very glad to provide this service,” Jebaraj said of the popular annual event. Jebaraj’s presentation was heavy on the headline piece of good news in Arkansas the past couple of years — low unemployment.

Arkansas’ jobless rate was 3.6% in December, unchanged from November, and below the 3.7% in December 2018. Year-over-year, the state economy added 16,396 jobs, a 1.25% increase according to data posted last week by the U.S. Bureau of Labor Statistics.

Five of Arkansas’ top six metro areas all saw an unemployment decline in 2019. The Pine Bluff metro was the exception, although Jebaraj repeatedly mentioned a new casino project as a potential boost to jobs and other area economic markers in the region. In the booming Northwest Arkansas region, Jebaraj said the area could add as many as 8,000 jobs in 2020.

In terms of job growth by sector, Jebaraj presented a chart that showed that professional and business services grew the most over the past decade in Arkansas, up 30%. He said Northwest Arkansas was responsible for about 60% of that increase. Placemaking and downtown development continue to become more important in economic development efforts, Jebaraj said.

“Ten years ago, that was something only hippies in Fayetteville were talking about,” he joked. “Now, I’m one of those hippies.” Jebaraj mentioned downtown and placemaking projects in Blytheville, El Dorado, Pine Bluff as examples of successful initiatives throughout the state.

In terms of areas of concern for the state’s economy, Jebaraj mentioned the “Phase 1” trade deal signed Jan. 15 by President Donald Trump and Chinese Vice Premier Liu He that reduces some tariffs between the countries and seeks to boost U.S. agri exports to China.

“There are a lot of questions about what the effects of the agreement will be,” he said. “The details we have indicate that soybean sales to China would resume. That takes the Arkansas soybean farmer back, essentially, to the beginning of 2018. But again, it depends on where we end with enforcement mechanisms and what other trade tensions may pop up.

“That’s the big ‘what if’ we don’t know anything about.”

During her presentation, Hunter noted a link between life expectancy and its potential impact on gross domestic product (GDP).

“For the first time in U.S. history, we actually have had falling life expectancy,” she said. “It’s a serious problem that we are now starting to see in our macroeconomic statistics. In addition to human suffering, this has feedback effects on potential GDP.”

In data released Thursday, the Bureau of Economic Analysis (BEA) said GDP grew 2.3% last year in the U.S., after rising at a seasonally and inflation-adjusted annual rate of 2.1% in the fourth quarter. GDP is the value of all goods and services produced across the economy.

Hunter said the deadly coronavirus is likely to have an impact on domestic and global growth over the next several months. The World Health Organization on Thursday declared the coronavirus outbreak a global public-health emergency. She said the economic impact of the outbreak may be comparable to the SARS (severe acute respiratory syndrome) virus outbreak in southern China 2003.

“Given that the Chinese economy will be crippled by the coronavirus in the first half of the year, that’s an impact we are watching very closely,” she said.