Moody’s economist predicts coming recovery, and growth for Oklahoma

By Patrick B. McGuigan

In a luncheon keynote at a journalism conference in Indiana, Steve Cochrane, a senior managing director at Moody’s outlined what he called “the shape of the coming recovery.” He said this includes a starring role for Oklahoma and the middle tier of the country in continuing to lead in economic growth and job retention. Cochrane, who oversees Moody’s reports on all fifty states, the territories and the District of Columbia, delivered a speech that could be characterized as pessimistic in the near-term and cautiously hopeful in the mid-to-long-term.

Briefly put, Cochrane said that he expects the technical end of the recession by the end of this year. Growth will continue to be weak in 2010, then stronger in 2011-12. He also outlined continuing risks to the American financial system in the area of foreclosures, specifying that continued employment erosion will put more homeowners under economic stress. A time of seeming deflation, he said, could be followed by strong inflation due to mounting deficit spending.

“Of the eleven recessions since World War II, this is the worst,” Cochrane told statehouse reporters from across America at the annual conference of CapitolBeat, the association for state capitol reporters and editors. In the end, he outlined the “script” for a 22-month long recession that began in December 2007 and will end next month or the month after.

For all the continuing bad news, including a national unemployment rate that will probably “continue to worsen,” part of the secret in the emerging recovery, Cochrane said, is that higher income households quickly adjusted to the recession by substantially increased savings rates. “They felt their reduction in wealth rapidly in the stock market, but then adjusted their habits rapidly,” the analyst said, to the benefit of the economy as a whole.

Labor markets will continue to be weak as federal stimulus spending fades away, Cochrane said. Nonetheless, he credited the stimulus package and said it had benefited the economy as a whole.

In response to a question from The City Sentinel, Cochrane said that the central tier of the country from Texas north through the Dakotas to the Canadian border will in some ways be leading indicator of the ultimate national recovery. While he said Texas might experience slight employment increases in the coming months, Oklahoma will face some continued erosion, with recovering job numbers in 2011 and thereafter.

Even as Cochrane spoke in Indianapolis, new data from the Oklahoma Employment Security Commission found Oklahoma unemployment rates went from 6.4 percent of the workforce to 6.5 percent.

As for the major states of California and Florida and the cluster of northeast states already experiencing high unemployment, Cochrane predicted California will be the first on the road to recovery, with Florida a ways behind and the northeast states, including New York lagging behind.

Cochrane found it “pretty remarkable” that so many states have so far avoided major spending and government employment cuts. He predicted however, that governments across the nation ultimately have “no choices” but to bring significant fiscal restraint to bear in order to weather the aftermath of the recession.