The Economy: What To Expect in 2006

Expect more of the same next year from the western Tennessee economy, a top regional economist said Dec. 15 at the “2006 Economic Outlook Breakfast.”

“That’s both the good and the bad news,” said Dennis Wilson, an economist at the University of Memphis. “In the Memphis area, we can expect slow but steady growth. We don’t see an economic shock that would lead to excellent performance or any hazards that would lead to a downturn.”

Wilson spoke to about 200 people at the breakfast, held at the University of Memphis Holiday Inn. Howard J. Wall, an assistant vice president for Research at the Federal Reserve Bank of St. Louis, spoke about the Arkansas, Tennessee and Mississippi economies. Gene Huang, the chief economist for FedEx, commented on the Chinese economy and the outlook in 2006 for the U.S. economy.

The Federal Reserve Bank of St. Louis co-sponsored the event, along with the Economic Club of Memphis.

Memphis, and much of Tennessee, is struggling to create good jobs, Wilson said. The Memphis branch of the Local Workforce Investment Area, a state-wide career center system, estimates that the region will create about 10,000 new jobs every year through 2012. That isn’t bad, Wilson said, but most of those jobs will pay less than $30,000 a year. The problem? The workforce is under-educated and under-skilled.

“In a nutshell, the state of Tennessee has weak support for education,” Wilson said. “The challenge is to increase the education level of the residents and then to attract industries that pay good wages.”

The news in Arkansas and Mississippi is similar to Tennessee. All three states are performing below expectations, Wall said. Education is one problem that keeps these states from booming. The education levels, especially in Arkansas and Mississippi, are well below the national average.

“If you want to look for one key indicator for economic success, it’s education,” Wall said. “That’s the main thing.”

Natural disasters—especially ones that are on a Biblical scale—also hurt economies. The job growth figures and other numbers tumbled in Mississippi after Hurricane Katrina pounded the Gulf Coast in late August.

“You would expect those to start going up again,” Wall said.

National news

Huang said the United States and China together account for more than 70 percent of world trade. About 300,000 people in China can claim a net worth of at least $1 million in U.S. dollars. The middle-class population in that Asian nation of more than one billion people also is growing.

The U.S. economy is enjoying steady gains, Huang said. Chain stores had reported strong sales in early December and electronic retailing continues to grow. By 2025, Huang said e-commerce will account for 50 percent of sales.

“You can’t do a haircut online,” Huang said, “but you can do just about anything else.”

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