By: centraljersey.com
Victoria Hurley-Schubert
Staff Writer
Local, national and global economies are recovering with job gains and consumers returning. Problems still exist, but are working themselves out.
That was the message from speakers at the Mercer County Economic Summit sponsored by the Princeton Regional Chamber of Commerce at The Conference Center at Mercer County Community College on Wednesday.
Robert C. Doll, vice chairman, director and chief investment officer of global equities for BlackRock Advisors and a Princeton resident, listed a few of the lingering problems: "debt, deficits, municipal problems, real estate issues and sovereign problems around the world, not to mention Japan and the aftermath of the most aggressive fiscal policy this land has ever seen."
Mr. Doll gave his opinion of the market from the point of view of an equity portfolio manager in his assessment of 2010 and looking forward.
"In the equity market for last year, there were three distinct moves – up, down and up," he said. "In the first and last the cyclical stimulus spoke loud and clearly and in the middle the structural problems reared their ugly head, but when the year was said and done, because the cyclical stimulus beat the structural problems, the market was up."
Stocks were up 15.1 percent last year, double the return of government bonds, he said.
"Despite all our problems, the United States stock market outperformed the global stock markets of the world," said Mr. Doll.
He also said New Jersey has the potential to impact national markets.
"We would argue that the headwinds from government, particularly Washington, D.C., are less onerous than they might have been 12 months ago," said Mr. Doll. "Wall Street is watching Washington, D.C., carefully and the other two places they’re watching are Trenton, New Jersey, and Madison, Wisconsin. We think those places are leading what’s going to happen in many other states around the country." Conservative governors of the two states are asking the unions for significant concessions to reduce spending and balance cash-strapped budgets.
He said confidence levels are improving and, in response, the growth outlook is accelerating.
"The U.S. economic recovery is over. That’s not because we’re heading back down, it’s because we have recouped all the economic loss of the great recession."
Credit conditions are still sick, but less sick than one year ago, said Mr. Doll.
"Last year, the consumer paid down debt, spent some money and increased their savings rate, a high quality problem to have," he said.
Two to three million jobs will be created in 2011 as unemployment falls to 9 percent, he said.
The stock market will outperform bonds and cash, experiencing a third year of double-digit percentage total returns for the first time in more than a decade as earnings reach a new all-time high, he said.
The United States, Germany and Brazil outperform Japan, Spain and China, said Mr. Doll.
In respect to Japan, "The only thing that matters to global growth at the moment, in our view, is what happens on the nuclear scene. The earthquake itself and aftershocks from it only affected 8 percent of the GDP of Japan, and Japan is less than 10 percent of the global GDP. Bring the nuclear piece back in and only time will tell."
In the Middle East "the only thing that matters … from a global economic and investment standpoint is the price of oil. None of these countries are big enough from an economic standpoint to make a difference. So we’ve got to watch where the oil is located and who’s producing it and the answer there is Saudi Arabia and to a lesser degree, Iran."
Luke Tilley, regional adviser for the Federal Reserve Bank of Philadelphia, agreed the economy is growing.
"Our forecasters do see growth coming forward" with consumers and business investments, he said. "The forecast is that the consumer is coming back."
A risk to consumer spending is the increase in oil prices.
"It is a tax on the consumer, essentially," said Mr. Tilley.
Job growth going forward is for a gain of 150,000 jobs per month nationally, with 200,000 to 220,000 jobs becoming available per month in the future, he said.
The unemployment rate is 17 percent for marginally attached and involuntary part time workers, which is the highest unemployment rate of all the segments of the unemployed.
"The labor market is not working well for one out of six of the workers in our workforce, which is discouraging," said Mr. Tilley.
Locally, the Mercer County unemployment rate is 7.8 percent, which is lower than the statewide and national averages, he said.
There has been job growth nationally. Private job growth has been "decent" in the past year, with 1.1 million jobs added nationally, Mr. Tilley said. Three sectors: manufacturing, transportation trade and utilities and financial services, added 1,300 jobs over the past year or so in Mercer County.
Inflation, driven by the Consumer Price Index, predicts that the low rate of inflation is going to continue. The average inflation is predicted to be 2.3 percent from now until 2020.

