A subprime mortgage fallout. A glut of unsold houses. Whispers of a possible recession.
The nation’s economy didn’t have an easy 2007.
What lies ahead for the United States in 2008 is anyone’s guess, but a handful of economy-minded professionals in the Charlottesville area think the region has a better chance of surviving lean times than other areas.
What follows are edited responses of four local businessmen and economists.

Michael E. Harvey
Executive director, Thomas Jefferson Partnership for Economic Development
Q: What are your general expectations for the region’s economy in 2008?
A: We’ve had stronger job and wage growth recently, but macroeconomic factors may weigh on the area in the coming year. However, our economy is underpinned by the [University of Virginia] and a strong service sector, so swings in the macro economy don’t tend to have as heavy a hand here like they do in other regions where the economies are more tied to the larger market.
I do think we have a housing overhang here though, and that will provide a drag on the regional economy until prices adjust and the excess inventories are worked off.
Q: What kinds of issues do you think will affect the economy for better or worse?
A: In the short term, the credit markets are the wildcard, in my opinion. Markets aren’t rational in the short term; they tend to punish with extreme prejudice. The result can be banks unwilling to loan to borrowers and each other, and even creditworthy borrowers are being shut out. Economies run on credit - take it away and it spells trouble.
On a positive note, I think that the global markets will actually play a positive role to help partially offset the credit problem. Many of our companies that have a presence overseas will continue growing, which should help support the job market.
Q: Are you worried about a recession? Why or why not?
A: I’m always worried about a recession. It’s what I do.
Q: What encourages you about the economic outlook?
A: The opportunity that an expanding global market offers and the flexible, innovative American economy. The growth in global markets should provide better balance over the long term, which will be good for everyone. The markets will try to force us to get our house in order, as witnessed by the dollar decline, so look for pain in the interim.

Michael Gaffney
Founder, Gaffney Homes; chairman, Rivanna Water and Sewer Authority
Q: What are your general expectations for the region’s economy in 2008?
A: The general economy in Central Virginia is strong and will remain so. The unemployment rate remains below 3 percent, while Charlottesville and Albemarle continue to grow at a steady 1.5 percent in population with the surrounding counties growing at an even faster rate.
Our area’s principal engine, the University of Virginia, is firing on all cylinders. The student population maintains a strong level of growth each year; capital spending for new buildings and renovations is at an all-time high and rising; and, the university’s success in appointing world-class researchers and staff members, while spending up to $100 million to relocate and supply them with lab space, demonstrates UVa’s commitment to becoming a world-renowned research facility.
Q: What kinds of issues do you think will affect the economy for better or worse?
A: Housing continues to affect the economy. For 18 months, the national news media has been warning potential homebuyers that they shouldn’t buy a house “now,” and these buyers are seemingly paralyzed into not making a purchase decision, which has caused sales to slow and inventory to grow. However, inventories peaked a couple of months ago and are now dropping.
Once the national news media announces “it’s a great time to buy a house,” the time will be too late and prices will be on the rise once again.
Q: Are you worried about a recession? Why or why not?
A: There is a potential chance of a recession in 2008. However, the Charlottesville area should not be greatly impacted … unless, of course, our local populace allows the national psychology to distress consumer spending or the way business is conducted.
Q: What encourages you about the economic outlook?
A: The same factors that moderate any effects from a national recession - our low unemployment rate, steady population growth and the university. I also anticipate the return to a stable housing market in the Charlottesville area as the negative national housing reports subside.

John L. Knapp
Senior economist in business and economics, Weldon Cooper Center for Public Service
Q: What are your general expectations for the region’s economy in 2008?
A: I think 2008 will be a difficult year for the nation’s economy, and if the nation’s economy catches a cold, we will experience the sniffles. I do not expect the economic outlook for this area to be as poor as in many parts of the nation because, although not recession-proof, we are generally less sensitive to economic downturns because of the presence of the University of Virginia.
Q: What kinds of issues do you think will affect the economy for better or worse?
A: I am very concerned about the weak market for residential housing. This bodes poorly for housing construction and will be a drag on local consumption as homeowners realize that their properties are losing value.
The poor housing market will adversely affect local government revenue, so it will constrain their spending for current outlays and capital construction. Reduced state aid will also put a damper on local government spending.
Q: Are you worried about a recession? Why or why not?
A: Yes, I am worried, and I have company. In its latest survey in December, The Wall Street Journal found that economists on average put the chances of a recession at 38 percent. Some of the factors leading to this pessimistic appraisal are the poor real estate market and the shaky position of buyers who used subprime mortgages, the high price of oil and the risk of a serious disruption in supply, the downward trend of U.S. worker productivity and the risk of a less than orderly further decline in the value of the dollar.
Q: What encourages you about the economic outlook?
A: Looking two or three years out, I am encouraged by the prospects for this area. The university is establishing a new school, the Batten School of Leadership and Public Policy, which will be a source of growth, as will the university’s emphasis in strengthening its role as a major research institution.
The U.S. Army’s National Ground Intelligence Center, which provides intelligence on foreign ground troops and resources, is involved in a major expansion that will add about 800 to 1,000 well-paid employees by 2011 and will attract many federal contractors to the area.

Butch Wells
General manager, medical staffing agency Tassco II
Q: What are your general expectations for the region’s economy in 2008?
A: I think the economy probably is going to be soft for another couple of years. Historically, the economy lived on a four-year ride. It was up for about three and a half years, and during election years it would peter off. This particular economy started in the Reagan era, and it hasn’t cooled.
Q: What kinds of issues do you think will affect the economy for better or worse?
A: I think the housing industry is the key. I think we have an oversaturation of buildings and as a result of that, you have more buildings than buyers. It will impact it negatively. Overall, it will be a buyer’s market.
Q: Are you worried about a recession? Why or why not?
A: I’m not worried. I think I’m a tad beyond worrying. I think perhaps there are other battles to fight beyond recession. We ought to be savvy enough to put the economy in motion.
Q: What encourages you about the economic outlook?
A: I think that we can’t bury our heads in the sand and say there is nothing we can do. The fact that we are talking about it is a good thing. The job market isn’t all that bad at this point.

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