Local economic expert remains optimistic

There are pockets of good news for the Northwest economy, but investors — large and small — are a bit jittery after a series of political, financial and foreign events have stirred the pot.

During a swing through Southern Oregon this week, Fred Dickson, senior vice president and chief market strategist for Northwest financial firm D.A. Davidson & Co., said clients echoed what they have seen on television.

Investors stewed over the national debt, and they particularly chafed over the strident debate about raising the debt ceiling. "We had senior clients who were concerned about Social Security," Dickson said. "We are not as selective as the New York firms that don't want anything to do with someone with less than $300,000 or $500,000. We have lots of clients who do have Social Security payments as a significant part of their income base. Now that all the checks came through, I'm not hearing as much."

He said questions coming from investors center around a possible return to recession, what's going on with some of the shaky European economies, housing, unemployment and interest rates — all of which affect the stock market.

"We're getting back to where we were before the debt ceiling became an issue," Dickson said. "Right now the easiest question to answer is about interest rates, because the Federal Reserve is adamant that it intends to keep interest rates ultra-low for a long time, most likely about two years."

That's not good for Treasury bill buyers, who can expect a 2.1 percent return for 10-year bonds down to a yield of 1/100th of 1 percent for a 30-day note.

He said the Fed's quest, however, is to provide a floor for the housing market, where a 30 percent drop nationwide in real estate prices coupled with low interest rates makes for the best time to buy in 50 years. But there has been no rush to buy.

"There are individuals who could make a marginal dent in the supply of houses," Dickson said.

"But there seems to be reluctance by potential buyers because there might be lower prices six months from now. The problem isn't cash, but in some cases the question is whether someone will still have their job a year from now."

Dickson argues against the idea that the country is slipping back into a recession.

"Few people realize the economy is operating at an all-time high by the broadest measure — the gross domestic product (the sum of all goods and services produced in the U.S.)," Dickson said. "What people don't realize is that we've moved above the goods and services at the peak in 2007."

The bad news, and what is painfully obvious to many Southern Oregonians, is that double-digit unemployment remains static. "What's happened is that GDP has improved without any help from the housing sector, which is important here," he said. "What's happened in all areas of business, nonprofits and government organizations is that they continue to find more productivity per worker than two or three years ago. That's why only 1 million of the 7 million people who lost jobs have been rehired."

Still, the news is not all bad in the region. Northern Oregon firms that make components for Boeing have benefitted from new orders for the aerospace giant's new 787 Dreamliner. Boeing also is ramping up to produce a next-generation 737. He said Intel, Oregon's largest non-public employer, is rehiring after substantial layoffs four years ago.

Dickson said there has been a shift at lending institutions, as well.

"It's been so unusual to have a banker knock on the door and ask if you want to borrow instead of knocking on the door and wanting to work out collection problems," he said. "Businesses will have access to normal financing they lost at the beginning of the last recession."

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