John Mitchell predicts cloudy economy, few silver linings

| Print |  Email
Written by Linda Baker   
Thursday, January 10, 2013

t JohnMitchellDuring a talk at the Portland Business Alliance Forum, Oregon economist John Mitchell predicts slow progress for 2013, long-term stagnation and an epic clash of generations.

BY LINDA BAKER

t JohnMitchellAt Wednesday's Portland Business Alliance Forum breakfast, Oregon economist John Mitchell presented his view of where the regional and national economy is headed in 2013. It was a cautiously optimistic short term outlook — not so optimistic for the long term. Alas, Mitchell would not allow me to reprint his end-of-speech poem, a brilliant and funny recap of 2013 data points: interest rates, inflation, job growth, taxes and so forth. Instead, here are a few notable and quotable excerpts from Mitchell’s talk:

• People who are waiting for the economy to turn around are a bit misinformed.  The economy has actually been on the upswing since 2009, although it’s been a barely perceptible upswing.  “The next turn is down,” Mitchell said.

•  Much of GDP growth in Q3 2012 came from an increase in defense spending and inventory accumulation, neither of which are going to continue their upward trajectory.  “We’re going to see weaker growth in the 4th quarter.”

• Housing was late to the party, but thanks to price declines and historically low interest rates, it has been a growth sector for six quarters, and is now one of the few bright spots.  Nationwide, residential permits are up 32% during the first 11 months of 2012.  

•  The number of renters is also increasing, thanks to young people who are shying away from home ownership and tighter credit standards. Mitchell recounted a joke currently making the rounds in mortgage lending circles:  in the old days, banks handed out mortgages to anyone with a pulse, otherwise known as “P.”  Today lenders require both a “P” and a “U”: a urinalysis and a polygraph.

 •  Job growth is on the upswing in 44 states, but not by much. About 4 million people are out of work, and the labor force participation rate is about 63 %.  The last time it was that low was December 1981.

• The policy cauldron threatens to drown us all.  “The debt ceiling was punted, not dealt with."  The country also faces two very different problems:  a short-term problem of weakness and long-term problem of unfunded promises. "These are two very different things that require different solutions.  Short-term weakness says you stimulate the economy. The  long-term problem says you've got to have some restraint."

• The big picture for 2013: “It’s a 2% forecast: 2% growth, 2% inflation. Not exciting, but up.”   But if the short-term forecast is for very slow growth, the long-term implications are sclerosis and stagnation.  “We’re on a Japan path.”

After the talk, I caught up briefly with Mitchell, who tacked on another problem that threatens to explode in the coming years: the clash of generations. Every generation likes to think it’s the apocalyptic generation, and that the world is going to hell, said Mitchell.

But there’s a qualitative difference between today’s apocalyptic thinkers and those of generations past, Mitchell said. Typically, it’s the elder generation bemoaning the excesses of the young.

“This time it’s the old people doing it to the young,” said Mitchell. With an unsustainable fiscal sitution, including expansion of Medical entitlements, sapping spending in education, health care and infrastructure, baby boomers are reaping the benefits while young people paying into the system will be left with nothing but the bill.

Or, as Mitchell put it,  “There’s no Association for Non-Retired Persons” lobbying on behalf of children or young adults.   

He alerted me to a book: the Clash of Generations: Saving Ourselves Our Kids and Our Economy, a call to arms that describes a U.S. in worse shape than the bailed-out countries of Greece and Ireland and the pending financial catastrophe facing our children.

“Read it, and I guarantee you won’t be able to sleep at night,” Mitchell said.  

It's not exactly poetry, but a pretty concise recap of the 21st-century U.S. economic outlook nonetheless.

Linda Baker is managing editor of Oregon Business.

 

Comments   

 
Guest
0 #1 ownerGuest 2013-01-13 04:52:41
Really good analysis. The best short article on this that I have seen.
Quote | Report to administrator
 

More Articles

Getting What You Pay For

September 2015
Wednesday, August 19, 2015
BY KIM MOORE

A conversation with Chris Maples, president of the Oregon Institute of Technology.


Read more...

5 questions for ImpactFlow CEO Tyler Foreman

The Latest
Thursday, August 13, 2015
impactflowthumbBY JACOB PALMER | DIGITAL NEWS EDITOR

Portland-based startup ImpactFlow recently announced a $5.7 million funding round. CEO and co-founder Tyler Foreman talks about matching businesses with nonprofits, his time at Intel and the changing face of philanthropy.


Read more...

Up on the Roof

September 2015
Wednesday, August 19, 2015
BY LINDA BAKER

In 2010 Vanessa Keitges and several investors purchased Portland-based Columbia Green Technologies, a green-roof company. The 13-person firm has a 200% annual growth rate, exports 30% of its product to Canada and received its first infusion of venture capital in 2014 from Yaletown Venture Partners. CEO Keitges, 40, a Southern Oregon native who serves on President Obama’s Export Council, talks about market innovation, scaling small business and why Oregon is falling behind in green-roof construction. 


Read more...

Reader Input: Fair Play

May 2015
Wednesday, July 15, 2015

Former Governor John Kitzhaber's resignation in February prompted some soul searching in this state about ethical behavior in industry and government.


Read more...

Reader Input: School Choice

September 2015
Thursday, August 20, 2015

Which of the following would be most effective in reducing the cost of operating a public university in Oregon?


Read more...

Aim High

September 2015
Thursday, August 20, 2015
BY JOE CORTRIGHT

We get the education we deserve.


Read more...

Baby. Boom!

September 2015
Wednesday, August 26, 2015
BY LINDA BAKER

A new co-working model disrupts office sharing, child care and work-life balance as we know it.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS