For over a year now the headlines have been predicting, “A Recession is Coming!” Fortunately, the economy still has not accepted the predictions. Real GDP growth was 1 percent in the first quarter and is on track to reach approximately 2.5 percent growth in the second quarter.

Economic activity in Fresno County has consistently out performed the other Central Valley Counties with better than expected numbers over the last year. And now even the residential housing market in Fresno County is showing signs of recovery with increased sales activity.

Has there been an economic slow down? Absolutely. Has it collapsed? Absolutely not!

In comparing this year’s figures to last year’s, the EDC has seen an increase in activity by 84% over the same period as last year! Fresno County seems to be on more companies’ radars than ever before, including companies from Canada.

The economy may or may not be headed for recession, but there are reasons to be optimistic job conditions could improve before the year is over and especially in 2009.

In trying to find information to back up my own observations I came across the following. It is an opinion by James W. Paulsen, Ph.D., Chief Investment Strategist, Wells Capital Management and the reasons he is optimistic about the economy:

“First, annual productivity growth (the value of labor) has surged to almost 3.4 percent in the first quarter of this year after nearly stalling in early 2007. Moreover, U.S. unit labor costs, after peaking in mid-2007 at 4.3 percent, has subsequently dropped to only 0.7 percent in the first quarter of 2008! Renewed productivity growth combined with slowing labor costs should help revive job creation in the coming months.

Second, most non-financial companies continue to enjoy positive profit growth, good liquidity and healthy balance sheets. What is lacking for most corporations is not the ability to hire, but rather the confidence!

Third, annual job growth peaked at only about 2 percent in the contemporary recovery, compared with peak growth of 3.5 percent in the 1990s, over 5 percent in the 1980s and common peaks in excess of 4 percent job growth during the 1970s expansions. Corporate confidence has remained cautious throughout this recovery causing most to avoid “over-hiring.” Consequently, the job losses this year seem mainly due to “suspension” of new hires rather than the more common “surge in layoffs.” Not only have these “lean” labor policies contributed to rather mild job losses, but they could also result in a quicker- than-normal job market recovery.

Fourth, during the last year, although international trade has been adding to real GDP growth, it has seemingly done little to help the job market. We are puzzled by the persistent and sizable job losses in the manufacturing sector at a time when this sector should be the primary beneficiary of a watershed shift toward trade improvement. Most likely, the beneficial aspects of trade improvement are currently being overwhelmed by the ongoing collapse in the housing and auto industries. However, should housing and autos begin to decline more slowly or bottom, the invisible undertow of net export growth could cause the manufacturing job market to recover surprisingly quickly!

Finally, the slowdown in job creation, like much of the rest of the economy, remains highly concentrated among the housing and auto industries. Despite comprising less than 3 percent of total jobs, of the 438K payroll jobs lost since the start of this year, 219K or 50 percent, are directly tied to the housing and auto industries. Should the pace of collapse in these two industries simply diminish or cease, the aggregate job numbers could quickly improve.” The financial and housing industries are already experiencing positive movement. However, the auto industry is going through devastating times, and only the innovative and strong will survive. And when the auto industry does turn around, we will re- experience the prosperity we have come to know in the past decade with a more controlled pace.