Vermont economy hits bottom; governor says ‘a couple of tough years’ still to come

Vt. economy hits bottom; revenue forecast up a bit

MONTPELIER, Vt. — Vermont’s economy apparently is turning a corner but heading into a slow, painful recovery, state budget officials were told Thursday.

“It’s going to be a couple of tough years still,” Gov. Jim Douglas said after the state Emergency Board heard from consulting economists for the administration and the Legislature. “Unemployment is still going up. Personal income for Vermonters is still declining. This is going to be a long, slow recovery.”

Economists Jeffrey Carr for the administration and Tom Kavet for the Legislature told the Emergency Board, made up of Douglas and the chairs of the Legislature’s budget and tax committees, that it could be 2013 before the state makes a full recovery.

But a glimmer of hope could be seen in separate reports filed by the two, whose slightly different approaches produce a revenue forecast that administration and legislative officials work from as they draft a state spending plan.

After a string of steep downturns in the forecasts, Carr and Kavet were able to revise their figures for the state general fund for the current fiscal year upward by $1.6 million. That’s a tiny uptick in a pot of money expected to total more than $1 billion.

The forecast still gave pessimists plenty to seize on. It included a small decline in revenues for fiscal 2011, which begins next July 1, and slight dips in state transportation and education funds.

Kavet and Carr likened the economy to a medical patient no longer in imminent danger of death but facing a long and painful recovery.

“The financial sector and the U.S. and global economies have survived this near-death experience, and actually looks like it’s at a turning point,” said Carr, of Williston-based Economic and Policy Resources Inc. “Now whether or not that leads to something that’s substantial in terms of a recovery is something that’s still very much up in the air.”

The two predicted the state’s unemployment rate would continue to rise from September’s 6.7 percent to 8.2 or 8.3 percent by the middle of next year. If those who have given up looking for work are factored in, about 12.5 percent of Vermonters are jobless, they estimated.

Perhaps the starkest indicator of how far a recovery would have to go is in the housing market, Kavet said. His report had a chart that showed housing starts in Vermont were up slightly from a low of 721 in July. But that paled in comparison to the roughly 4,600 housing starts reported 20 years earlier, in July of 1989.