Economist: America to Feel Recovery Soon
Experts comment on the pace of economic recovery, and the government’s role in it, during MSCI’s recent Carbon Division conference.
By Dan Markham, Senior Editor
Since the recession technically ended in mid-2009, the United States has been experiencing a slow, almost imperceptible rebound. In 2013, economist Marci Rossell insists, the average American “will finally begin to feel the recovery.”
Rossell, a former chief economist for CNBC, spoke Feb. 22 at MSCI’s Carbon Division Conference in Bonita Springs, Fla. There are three primary reasons 2013 will be different from the years leading up to it, she said: the stock market, the political system and the housing market.
Like the economy itself, the stock market has been on a long, slow march since falling precipitously during the recession. Last month, following her presentation, the Dow Jones hit an all-time record, finally eclipsing the peak set in the pre-recession year of 2007, as Rossell predicted.
The return to previous highs gives a huge boost to consumer sentiment, she said. When individuals look at their 401Ks and other accounts and see them back where they were, “it’s a powerful psychological factor. It helps the way people feel about spending money.”
Despite the ongoing sequester debate in Washington, Rossell feels the resolution of the fiscal cliff and other legislative issues will relieve some of the uncertainty and help prod the economy. Likewise, the housing market, which showed its first signs of life in late 2012, will once again serve as a boost to economic growth his year. At the peak of the crisis, the housing inventory stood at almost a full year. Today, it’s close to its historical norm of four months, she noted.
Around the world, Rossell said, Europe is about to become the chronic drag on the global economy that had been Japan’s distinction for the past 20 years. The poor response to its sovereign debt issues, plus fundamental problems with its single currency, stand to leave the continent in the doldrums for a long time.
During the question-and-answer portion of her remarks, Rossell offered some biting observations on economics in general:
• Asked if there is going to be a battle over currency in the coming years, she responded: “A currency war is one nobody wins. Congress and the White House may not recognize that, but people in the central banks do.”
• The biggest impediment to any major infrastructure build, or other spending programs that might goose the economy and benefit the steel industry, “is the AARP. Unless Social Security becomes means-tested [pays less to retired people with more wealth], it will be a long-term problem.”
• Rossell criticized the response to the banking crisis that played such a major role in the downturn. In the wake of the financial crisis, the “too big to fail” banks have actually gotten larger. “The solution is to never let them get too big,” she said, advocating lighter regulatory controls but a cap on their size.
• Finally, when asked about the continued uncertainties in the economy and how the metals distribution industry is supposed to deal with it, she responded pointedly, “It’s your job to deal with uncertainty. If it were easy, anyone could do it.”
|Panelists Appeal for Stronger Energy Policy
Despite all the bullish talk about the energy market, it’s not all good news. Panelists at MSCI’s Carbon Conference called for a more supportive government energy policy, especially when it comes to the controversial Keystone XL pipeline.
“Business is not very good right now,” said panelist Gary Stein, president of service center Triple-S Steel in Houston, pointing to the declining rig count.
The energy market would undoubtedly get a boost if the Keystone XL pipeline from Canada to the Gulf of Mexico is given the go-ahead. Environmental opposition in Nebraska and other states, combined with similar concerns from the Obama administration, have stalled the project. But the delay in getting the much-needed, job-creating construction under way perplexes the panelists. “We should not let the minority dictate what the majority wants. We have great neighbors to the North, but we’re crazy to jeopardize this,” Stein said.
Panelist Carl Parker, chief procurement officer at Canadian service center Samuel, Son & Co., Ltd., in Mississauga, Ontario, said the Canadian government would prefer to work with its friends in the U.S. and see the Keystone pipeline built. But the petroleum drilled from Canada’s abundant shale plays will find a home. “Canada can build the pipeline to Vancouver and send it to China. I am pretty sure they would prefer to be supported by the U.S., but if it’s not going to happen, they will go elsewhere.”
For Stein, the answer is simple: “Would we rather buy a barrel of oil from the Middle East where people want to kill us or from Canada where the only thing they want to do is beat us in hockey.”
Keystone XL is not the only subject on which the executives take issue with Washington. “We are able to do our business in spite of what happens in Washington, not because of it. Their job is to be re-elected, that’s their agenda,” said Werner Rankenhohn, president of material-handling equipment maker Kasto Inc., Export, Pa.
Burdensome regulatory requirements on the federal and state levels force companies to devote ever-more resources to compliance. The cost in time, money and personnel impedes profitability, often for no good reason, the panelists agreed.
Attracting talent to the steel industry is another ongoing challenge, said panelist Ladd Hall, executive vice president at steelmaker Nucor Corp., Charlotte, N.C. Nucor offers internships to promising students at the early undergraduate level. “By the time they’re seniors they’ve either dropped out or they’re on board. You need to sell them [on the industry] for a long time before they’ll apply for a job.”
Convincing the next generation of workers that the steel industry is an attractive one is critical for the future. “There’s got to be a better way to sell our industry,” Stein said.