FARMINGTON — Bruce Domazlicky makes it his business to know where the economy is headed and what factors are the driving forces behind the national financial scene. This week he shared some of those details with Farmington Chamber of Commerce members.
Domazlicky serves as director of the Center for Economic and Business Research based on the campus of Southeast Missouri State University in Cape Girardeau. He was the guest speaker at Thursday’s chamber meeting and offered an album of economic snapshots to consider.
“Why a tepid recovery?” he asked. “I’ll give you a couple reasons.” For the next half hour Domazlicky led lunch guests through a slideshow of unemployment, housing starts, income and demographics numbers and charts. He began by saying the growth rate following the recent recession has been slower than normal. Then he explained the reason why.
Statistics show that following every severe economic downturn in America’s history there has been a rapid increase in new housing construction. Or at least that was the case until 2006. There were two main reasons why, Domazlicky said.
In the last half of the 20th century the American population’s debt to disposable income ratio rose consistently. With the onset of credit cards and other consumer debt, teamed with an increase in the cost of everyday goods, people began saving less and charging more. Then from 2000 to 2006 the debt to disposable income ratio climbed from 96 percent to an all-time high of 137 percent. “Debt exploded,” Domazlicky characterized.
He explained that when the national economy “fell apart” in 2006 a lot of people didn’t have enough reserves or disposable income to offset the fact that their largest investment, their home, had just lost significant equity. He said people had become accustomed to using their homes as a credit card — quick to pull equity from their home through a line of credit or second mortgage to buy a new vehicle or take a vacation.
Secondly, Domazlicky explained that historically housing starts always increased rapidly following a recession. It’s said that each new home built is equivalent to creating three full-time jobs. Following the 2000 economic downturn housing construction didn’t slow, due to actions by the Fed and sub-prime lending, paired with unrealistic home valuations.
“It flooded the market (with homes),” the research director said. “It set up a bad scenario (for the 2006 recession).”
Now some six years later new housing construction is just starting to show a measurable climb. Paired with an average unemployment rate at 8 percent and the Treasury bill rate holding low, the national economy continues to sputter.
Then Domazlicky turned his attention to more localized numbers. He said the per capita income for St. Francois County is $26,500, or 73 percent of the state average. The most recent count showed the county had 29,744 jobs of which 6 percent were in construction, 6.5 percent were manufacturing, 14 percent were in the healthcare field, and 20.4 were government related.
As for anticipated income based on the level of education completed, a non-high school graduate living in Farmington can expect to make about $13,550 on average. A high school graduate should earn about $23,914, while some college should result in an income of $27,236 per year on average. Someone completing a bachelors degree should be able to earn roughly $36,184, while a graduate degree could net on average $51,140 annually. “That’s something to tell your kids,” Domazlicky concluded.
After years of filling the director’s seat in the office located at SEMO, Domazlicky said he will be retiring at the end of the current school year. He concluded the talk by explaining some of the services his office can provide the business community including research and statistical data.
The Farmington Chamber of Commerce holds an investor luncheon at noon on the third Thursday of each month. The chamber can be reached by calling (573) 756-3615.
Doug Smith is a reporter for the Daily Journal. You can reach him at 573-756-8927, or at email@example.com.