Albert Niemi Jr., now dean of Southern Methodist University’s business school in Dallas, returned once again to Cobb for the 2014 economic forecast breakfast Tuesday morning, hosted by the Bank of North Georgia at the Cobb Energy Performing Arts Centre.
Niemi said the global economic downturn that started in the fall of 2007 has been a slow and tedious road to recovery.
Although The Great Depression of the 1930s was worse, with a larger percentage of Americans jobless, the recovery was far quicker than what is being seen today, Niemi said.
“It used to be in the first 36 to 48 months of a recovery, you are growing at around 4 to 4.5 percent,” Niemi said. “So this recovery is a recovery at half speed.”
Niemi projects it will take until 2029 to reach the level of job creation needed in America to reach “full employment.”
“We are going to have several decades, nationally, of a depressed economy,” Niemi said. “It is mind boggling what is happening to the United States of America.”
Niemi sits on the advisory board of Bank of Texas and is a shareholder of Synovus Bank, which owns Bank of North Georgia.
During his forecast on Tuesday, Niemi gave some predictions, but even more hard facts.
“We are facing stiffer head winds than we ever have in the past,” Niemi said.
America is losing its middle class
“Why are we in such a mess?” Niemi asked the crowd of hundreds of businessmen and women gathered in the ballroom.
One statistic Niemi points to is the 53 percent of recent college grads who are jobless or underemployed.
“A college diploma isn’t worth what is used to be,” Niemi said. “To get hired, grads today need hard skills.”
Niemi said engineering students have no problem finding employment, people with biology or chemistry degrees are able to get work, and it is a good job market for accounting, finance and business management graduates.
“You need a tool kit, you need a skill set,” Niemi said. “If you are coming out with a degree in big ideas, or liberal studies, better get used to wearing a green apron and going to Starbucks.”
More often young adults are working a job, or two, that do not require a college degree, Niemi said.
The lack of high-paying, professional jobs is just one indicator that the United States is losing its middle class and there is a growing inequality between the rich and the poor, Niemi said.
“The rich are doing real well in this sluggish recovery, most of the job creation is at the lower end, and the middle class is the group that is really suffering,” Niemi said.
Like last year, Niemi said the United States economy has eroded as a result of a shift from manufacturing to service industries.
“I go back to 1960 and I look at what were the 10 largest employers in America 50 years ago: General Motors, U.S. Steel, Chrysler, General Electric, Ford,” Niemi said.
Now America’s biggest employers, according to Niemi’s report, are Wal-Mart, McDonalds, Kroger and Yum! Brands.
“We know them as Taco Bell, Pizza Hut and Kentucky Fried Chicken,” Niemi said about Yum! Brands.
These low-end retailers and fast-food restaurants, which pay minimum wage, dominate the list with IBM ranked fourth and UPS fifth.
Niemi predicts the top three economies in the United States over the next 20 years will be Texas, North Carolina and Georgia.
“That’s the good news,” Niemi said, highlighting Atlanta’s location in the Southeast, with a major global airport and a “great quality of life.”
Matt Gryder, 30, who lives in Midtown, works for Georgia Oak Partners in Atlanta, a private investment firm that seeks out industries and corporations with demonstrated growth.
Gryder said this was his first year to hear an economic forecast by Niemi, but he has gone to two other speeches about the nation’s economy this year.
The focus on Georgia was much appreciated, with the majority of information on how the recession has impacted the state, not just national trends, Gryder said.
Georgia’s gross domestic product in 2014 will grow by 3 percent, which will outperform the United States economy that will see 2.4 percent GDP growth in 2014, according to Niemi’s report.
“The word is out, (Georgia) is a great place to do business,” Niemi said.
The spurt of new businesses moving to Georgia means the area is becoming a prime place to live, with a population growth in the state over 30 percent, according to Niemi’s report.
With Georgia gaining residents, the local housing industry that was critically hit by the recession is rebounding.
Nationally from 2000 to 2007, there were 1.8 million homes built each year, until 2010 when the number drastically dropped to 580,000.
In 2014, the number of new homes is expected to reach 1 million nationally, with 45,000 in Georgia, Niemi said.
For Georgians to buy homes, they need disposable income. Yet, according to Niemi’s report, Americans have nearly as much debt as available cash.
Niemi’s report stated that in 1982, the amount of debt owed by an average American household accounted for 60 percent of the family’s disposable income.
In 2007, according to Niemi, the amount of debt surpassed disposable income by 30 percent. By 2012, the amount of debt dropped to 90 percent of the amount American households had in the bank.
Niemi said the most impactful recent federal public policy decision was letting the Bush tax cuts expire this year, which had temporarily dropped the highest income tax rate from 39.6 percent to 35 percent.
Niemi also pointed to the Medicare tax increasing from 2.9 percent to 3.8 percent, and the federal payroll tax increasing from 4.2 percent to 6.2 percent.
“Collectively that is a trillion dollar hit to discretionary income,” Niemi said. “That is one of the biggest tax increases in the history of the United States economy.”
That problem, he believes, is compounded with state and local governments making spending cuts, because they “have gotten in too deep.”
Niemi bragged about his new home state of Texas several times during his address on Tuesday, saying it has created 52 percent of the jobs in the United States in the last 13 years.
Niemi said the jobs gains are due to Texas not having an income tax, both personal and corporate.
The United States has taxed income at the federal level for only 100 years, with 1913 being the first year there was a federal income tax opposed, Niemi said.
Pamela Shank, 49, lives in west Cobb and works for Lighting Technologies north of Austell.
Shank said she favors Georgia eliminating its state income tax.
“I think if people are able to hold on to more of their income, they can spend it and help the Georgia economy, instead of sending it to the government, which doesn’t increase jobs,” Shank said.