There is Room for Optimism (Jeff Hankins Publisher’s Note)

Please allow me to offer a healthy dose of economic optimism.

This assumes I can remain optimistic long enough to write this column.

The truth is that I’m lukewarm. Every time I begin to feel upbeat about next year’s turnaround, I’m taken down a notch by sobering news.

War, threats of more terrorism, plant closings, layoffs, state budget cuts and, yes, economic recession are dominating the news. It’s a frenzy that is enough to shake anyone’s short-term confidence about business and life.

A run-up in the stock market that was exaggerated by technology issues, a buildup of jobs that wasn’t always justified, exorbitant compensation increases and unreasonable profit growth expectations that couldn’t be supported long-term created the perfect buildup for a recession. The events of Sept. 11 simply magnified what was already happening and created additional challenges.

We became so caught up in the boom of the ’90s that we convinced ourselves we would defy the history of economic cycles.

In Arkansas, we like to think our overall economy doesn’t have excessive swings — good or bad. But rural counties that lose large manufacturing plants face extreme situations.

Conversations with company executives in recent weeks have given me confidence and relative comfort for the future. People are in a slowdown mode but not a panic mode.

We’re being hit from multiple fronts. Sales for most of us are slower. Increases in health insurance premiums statewide are soaring anywhere from 20-80 percent. Property and casualty insurance rates are jumping 15-30 percent.

While the softer labor market will relieve some pressure on out-of-control labor costs, little growth in personal income means no increase in discretionary spending next year.

The lowest interest rates since the ’60s have led to mixed results. Heavy refinancing activity has reduced mortgage payments for homeowners, but low rates have also tightened credit availability for many consumers because financial institutions can’t take the risk with such low margins.

State budget cuts can be blamed on both the Huckabee Administration and the state Legislature. They budgeted with late 1990s emotion instead of 2001 reality. You can’t miss what you never had, so it would have been wiser to budget revenue conservatively.

So why do we have room for optimism?

Our economy continues to make a healthy transition away from its heavy dependence on manufacturing, with job growth primarily in the services sector. New manufacturing jobs that we’re attracting typically offer better pay than the ones we’re losing.

We have dozens of stable companies and can look forward to the arrival of Nestlé USA and accompanying industries in northeast Arkansas. The $1 billion highway construction program continues. Tobacco settlement initiatives will start kicking in this year.

The state seems certain to lose in the Lake View School District case, and the resulting overhaul of the secondary education system should be viewed as an opportunity — albeit an expensive one.

The stock market has already recovered from the Sept. 11 tragedy. With corporate profits sagging so much this year, comparisons by the second half of next year should be favorable, resulting in a nice bull market.

And unemployment in the 5-6 percent range is hardly the end of the world. We used to consider 5 percent to be “full employment,” and we’re not likely to see the 7-8 percent levels of the early ’90s nor the double-digit jobless rate of the early ’80s.

So cheer up, and go spend some money. The comeback will make us forget 2001.

* * *

Did anyone besides wishful-thinking Democrat loyalists and the more liberal newspaper columnists really think the 3rd Congressional District race was a contest?

Democrat Mike Hathorn never had a realistic chance against Republican John Boozman. The Republican base of the most populous counties in the district is daunting, and it was always a longshot.

Boozman’s victory should finally give Gov. Mike Huckabee the upper hand in leading the Arkansas Republican Party. Here’s the question now: Is U.S. Sen. Tim Hutchinson willing to back off in exchange for more than token support from Huckabee in his battle against Attorney General Mark Pryor?

Jeff Hankins can be reached via e-mail at [email protected].