The recession is over, but South Carolina's economic problems will remain into next year, the state's top university economists said Wednesday.
Hiring and personal income in the state could improve a little in 2010, but not enough to make up for the losses from a recession that started two years ago, the economists said.
"We're not on the Yellow Brick Road again," Clemson University economist Bruce Yandle said during the USC Moore School of Business annual Economic Outlook Conference. "It just means it's not going to get any worse."
But it could.
The economy could slide in 2010 if business investment cannot make up for dwindling federal stimulus funding that has propped up spending since it was approved this year, USC economist Doug Woodward told the gathering of business leaders.
"We're running out of options here," said Woodward, who called his outlook for 2010 "cautiously pessimistic."
Still, when the economy recovers, metro areas - including Columbia and Greenville - will lead the way, Woodward said. Charleston will likely have the best shot at the quickest rebound with the recently announced $750 million, 3,800-employee Boeing 787 jet assembly plant.
Personal income in South Carolina is expected to rise 3.3 percent next year, Woodward said, a reversal of this year's 1.4 percent decline. In a more normal economy, income rises about 6 percent to 8 percent a year, he said.
But without good news on jobs, the economists said consumers are expected to hang onto their money.
And there was little good news about jobs statewide. South Carolina's unemployment rate - which stands at a record-high 12.1 percent - is expected to remain in the double digits through next year.
"Ask how many people feel the recession is over and no hands go up," Coastal Carolina University economist Don Schunk said. "That reflects the labor market."
Consumers, who drive two-thirds of the economy but are worried about their jobs, are just not expected to start opening their wallets next year.
They are hoarding cash - the U.S. personal savings rate is at a decade high - and paying off debt rather than going shopping, economists said. Yandle said he does not expect an end soon to what he calls "fear-induced savings."
That makes this year's holiday sales key. A good season will shore up confidence for 2010, while a bad one could lead to a spike in souring commercial loans for stores and shopping centers, Woodward said.
But banks also remain at risk, economists said. Some might not be as solvent as they appear because they hold so many problem loans. That might be a reason why lending remains tight.
"You have to be gold-plated ... to get your loan approved," Yandle said.
Even the chief executive of South Carolina's second-largest publicly traded company raised questions about banking during his speech at the conference.
"Clearly, we have been facing a massive lack of confidence in leadership, particularly in leaders of our largest government and private financial institutions," said Harris DeLoach, president of Hartsville-based packaging giant Sonoco Products.
Still, DeLoach said he expects to see some signs of growth next year that could prevent a "double dip" where the economy would sour again soon after the end of the recession.
"It will likely be slow, steady improvement," DeLoach said.
Continued stimulus funding, increased consumer spending and businesses using some of the cash they have saved up could help the economy in 2010.
Sonoco, which adopted the theme of "Ready to Grow" for next year, has nearly doubled the amount of cash it has on hand during the year, while reducing expenses and closing plants.
Woodward said he believes the recession, which began in December 2007, ended in September.
But the state's economic woes began well before that as job growth started slowing in 1999, Schunk said.
If jobs had grown in the past decade at the rate they had since 1960, South Carolina would have 270,000 more jobs than it does today, he said. That roughly equals the number of South Carolinians who were unemployed in October.
South Carolina will end this year with about 5,000 more jobs than it had in January 2000.
"You can refer to the last 10 years as the lost decade of permanent, sustainable job growth in South Carolina," Schunk said.
Schunk, who called his view of 2010 pessimistic, sees employment slipping again next year by 1.3 percent after a 4 percent slide in 2009.
Little help is expected next year from typical large drivers of an economic recovery - factory expansions and housing starts, Woodward said.
Factories are operating at decades-low levels so they don't need extra space and housing starts have not shown strong signs of a significant turnaround, he said.
While Woodward expects jobs to grow slightly next year - by about 0.2 percent - he admitted: "That's almost nothing. We're just going to be treading water."