What will be the “New Normal” and Are We There Yet? Jeffrey H. Dorfman The University of Georgia March 26, 2010.

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Presentation transcript:

What will be the “New Normal” and Are We There Yet? Jeffrey H. Dorfman The University of Georgia March 26, 2010

Outline How We Got Here Have We Hit Bottom? Where Are We? When Will It Get Better? Will It Ever Be Like It Was Before?

How We Got Here Mortgage / Real Estate Mess Real estate bubble started with dot-com bust. Free markets mean booms and busts. Too Much Debt Borrowing when things are good means no credit when things are bad.

How We Got Here Source: Federal Reserve

Have We Hit Bottom? Source: UGA Selig Center

Has State Revenue Hit Bottom? Source: GA Dept of Revenue

Has State Revenue Hit Bottom? Source: GA Dept of Revenue

Have We Hit Bottom?

Employment and unemployment rising together are a sign of economic recovery as people resume job searches.

Where Are We? Source: Conference Board

Where Are We? Source: Institute for Supply Management

When Will It Get Better? Source: Conference Board

When Will It Get Better?

Source: US Census Bureau

This Has Happened Before Source: US Census Bureau

The New Normal is an Old Normal Source: US Census Bureau

Will It Be Like Before? State funding is now down to 34% of UGA budget (from about 50% in 2000). We have lost $100M/yr in state support. The future will be much more dependent on grants and internal funding (like tuition). Will take 3-4 years to regain lost state funding IF EVER. Source: UGA Budget Reports

Will It Be Like Before? Georgia economy was led by real estate and financial sectors. Those sectors will not return to peak levels for a long time, if ever. State government needs to be resized to the long-term trend and not to the best of times. Depending on state or federal funding will never be as secure as it used to be as debt burdens increase at all levels of government.

What is the “New Normal” We need to plan for normal growth from the current situation. We should not expect to recover to earlier levels and then grow from there. The new normal starts from here and now. Should we learn to fund ourselves and not depend on sources that are not “customers?”