By Mike Fitts
mfitts@scbiznews.com
Published June 12, 2009

South Carolina’s recession has not yet hit bottom, and it could well produce 15% unemployment by early next year, economist Donald Schunk told the state’s Board of Economic Advisors.

Acting on Schunk’s advice and its own weak revenue numbers, the board cut its state revenue forecasts Thursday for the budget year that ends June 30 and for the next fiscal year. The current year’s estimate was cut by $92 million. Next year’s estimate was cut by 2%, or $120 million, to $5.95 billion.

Chairman John S. Rainey said lawmakers and state agencies should note that further cuts in next year’s budget seem probable.

This year’s shortfall could be covered by reserve funds or further trims by the Budget and Control Board.

Gov. Mark Sanford called for targeted cuts to meet any budget shortfall and for the Legislature to pass spending caps to block future overspending.

“All signs point to continued revenue reductions as the year goes on, and the necessary cuts that will come with those reductions mean we need to plan for dealing with them now,” Sanford said in a statement.

Schunk, a research economist at Coastal Carolina University in Conway, said he sees numerous reasons to believe South Carolina’s job market will continue to weaken for the next 12 months. He expects the state and national economies to stop declining by the end of 2009, but jobs here likely will lag behind.

He expects employment to reach 13% or 14% by the end of 2009 and 15% by the summer of 2010.

Schunk points to several key industries that he expects will continue to weaken — sectors that, by his count, provide more than half of the employment in South Carolina.

• Manufacturing employment: The sector is in a pronounced slide. The reasons include several factors unrelated to the recession, such as modernization and overseas competition. Those are unlikely to turn around any time soon, he said.
• Leisure and hospitality: The sector will continue to employ fewer people as travel is reduced in tough economic times.
• Retail trade: Lingering consumer caution about debt and unstable employment mean this sector also is expected to be slow adding jobs back.
• Government: The public sector will continue to cut jobs as revenues are hurt. This sector will be slow to rehire.

Schunk said all of this is bad not only for South Carolina’s unemployment picture, but for its larger economy, too, as consumers spend less. He noted that total employment in the state is now at levels seen in 2000, but the state has added a half-million people in that time.