Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 24, 1991 TAG: 9103220948
SECTION: BUSINESS PAGE: E1 EDITION: METRO
SOURCE: Daniel Howes
DATELINE: LENGTH: Medium
The quest for signs that the recession is disappearing seems almost frantic. A few cautions: Postwar euphoria doesn't last long; a single-month uptick in housing starts may prove no more than a seasonal improvement. Reports from real estate agents and car dealers that more folks are looking and more are closing deals does not a recovery make.
"I think we need to be very, very careful that in looking for something positive we don't cast aside rational thought," state Finance Secretary Paul Timmreck said. "When you have consecutive quarterly declines in inflation-adjusted income, where is this money going to come from that people are going to spend to spur the economy?"
Alan Gayle, chief economist for Richmond-based Crestar Bank, warned in his weekly "Economic Monitor" that recent bad economic news outweighed the good and "the good news was not sufficient to suggest the recession had come to an end."
Call it our hankering for instant, painless solutions to intractable economic problems. But the boom many celebrated throughout much of the 1980s created a bust in 1990 that may linger for several years in the go-go regions of Virginia and elsewhere.
Northern Virginia, that massive and sprawling bedroom for Washington and the Reagan defense industry, saw its building and consulting service industries grow throughout much of the past decade as though the end would never come.
It did, and almost overnight.
"Virginia does well preparing for war," Samuel Laposata, a Virginia Power Co. economist, said last week. "But when everybody leaves Tidewater to fight a war it's not so good. The '80s played right into our hands. It was great for Virginia."
Or, perhaps, it was great for of Virginia. It's no secret that Roanoke and parts west never really joined the buildings-and-bombs boom of the Reagan years. Now, that's a good thing. "Out where you are it's kind of `Steady as it goes,' " Laposata said from Richmond.
"When you have growth in a state that hinged on construction, you've got to start worrying," he continued. "You know it's going to slow down on you. You just didn't have that kind of problem in the Western region."
It may take Northern Virginia several years to absorb the excess wrought by years of frenzied building and development, Laposata said, while the rest of the state economy may grow a steady, if unexciting, 3 percent.
Meanwhile, economists are echoing Gov. Douglas Wilder, who said last weekend that the state economy still has not bottomed out. "I hope we will see a bottoming out sometime this year," the governor said during a meeting in Roanoke. "What I want people to understand is that it's temporary."
This time, temporary may be a function of location. Virginia Employment Commission figures show Northern Virginia's manufacturing and construction employment rates dropping like a stone in the past few months, far more than any other region of the state.
Western Virginia suffered the slightest dip in construction employment, was second to the Richmond-Petersburg area in manufacturing employment growth and far outpaced the other regions - and the state average - in trade employment growth. Comparatively speaking, we aren't really hurting.
Timmreck sees a faint flicker at the end of the economic tunnel. Overall state employment grew slightly in January despite the Persian Gulf War and the traditional post-holiday slowdown.
"When the number [employed] goes up, the withholding [of state taxes] gets larger," Timmreck said. "When that number goes down, the withholding gets smaller" and state revenues slide, forcing cutbacks.
Unfortunately, Virginia's economic future will be dictated by the mammoth federal budget deficit, experts say. Voters have little stomach for tax increases to solve the ballooning budget morass, so post-Cold War cutting and down-sizing are becoming Washington's new buzzwords.
"Defense will never be what it was in the '80s," Laposata predicted. The Bush Administration has proposed a 25 percent cut in defense spending over the next five years, and however that may be revised in the wake of the war, the conclusion is simple: New and serious economic problems loom for parts of the Old Dominion.
Virginia claims nearly 208,000 defense-related (civilian and military) jobs - second only to California. The administration's 1992 defense budget includes $247 million in military construction projects for Virginia, though outlays "for military construction in 1993 are expected to decrease significantly," Sen. John Warner said last month.
The new world order may prove painful at home.
by CNB