Rotarian Linda Williams (Prestera) chats with financial advisor Bob Brewster

March 17, 2009

Bob Brewster says the recession -- "the government never declares a depression" -- may have not hit bottom yet, but recovery already could be underway.

Brewster, a senior financial advisor with United Brokerage Services, told Putnam Rotarians today that the economy has been worse at times in the ten recessions since 1948.

In 1983, the high point of unemployment in West Virginia was 18.2 percent. The national unemployment that year stood at 10.4 percent.

Present unemployment in the state is at 7.5, lower than the present national average of 8.1 percent. But the statistics in West Virginia typically run six to twelve months behind the national figures.

By comparison with the Great Depression, in 1933 the national unemployment rate was 25 percent. By 1937 it had dropped down to 14 percent.

"This time last year things were good," Brewster told the group. "Then all of a sudden came the decline in the market, housing prices went up. Inventories went up.

"Most of it really started beck in the summer of '07, but it didn't hit Main Street until fall of last year."

Brewster called attention to the changes in accounting practices.

"In 1938, FDR got rid of mark-to-market accounting (wherein value is assigned according to true market price). Not until the Sarbanes-Oxley Act of 2002 (in response to Enron and other corporate accounting scandals) did we start seeing that come back into play.

"So we had a period from 1938 until 2002 -- in which the full effect didn't hit until 2007 -- that there was really no panic on the banks, there were really no great fears.

"It's strange that once we put that (mark-to-market) rule back into effect, all of a sudden we have the panic that is going on.

"A lot of people have been asking to suspend the rule, and last week Congress started hearings on that."

For signs of an improved economy look at unemployment, look at the Gross Domestic Product (GDP), and the Consumer Price Index (CPI).

Look at the housing market. Boston was one of the first major areas to experience a housing price drop. Boston probably will be the first to come back. When Boston housing has stabilized for three months, you have another indication.

General Motors has declined to take stimulus money. That is another good sign. Used car prices have stabilized. Watch for new car sales to rise.

Look for temp hirings. That is a sign that too many jobs were cut, and companies will begin to come back with temporary hirings.

Typically, federal actions to bolster the economy take six to eight months to amke an impact. "They started working on that back in October last year, so the things the government did to help the economy are just now making a difference.

"Economists tell us that we're looking at the last quarter of 2009, the beginning of 2010 before we can see a turnaround in what we're experiencing right now."