Tough Christmas seen for N.C. retailers

When policymakers with the Federal Reserve want to know how the economy is faring in the Carolinas, they consult the work of economist Matthew A. Martin.

Martin joined the research staff at the Fed's Richmond bank in early 2006. From his Charlotte office, he helps the Fed track this region's economy.

Later this year, his team plans to begin releasing monthly surveys of more than 160 businesses in the Carolinas to better gauge the health and mood of the services and manufacturing sectors. Meanwhile, Martin is monitoring how energy prices and the housing slump are affecting the Carolinas.

On Monday, he discussed the economy with editors and reporters of The News & Observer. Here are some highlights:

ON THE ECONOMY'S HEALTH: Overall, the Raleigh region is holding up much better than the nation because of its mix of jobs and its relative shelter from the worst of the mortgage mess, Martin said.

Even with the recent pullback in energy prices, the “economy is clearly in a weak phase,” he said.

With food and energy prices up, job and wage growth slowing, and the boost from government stimulus checks mostly over, it will be next year before “we start to see some firming in the economy.” As part of that slowdown, it's likely to be a tough Christmas for retailers.

That said, the mix of industries in the area and continued population growth suggest that this market “will hold up better than the national picture.”

ON THE HOUSING MARKET: Builders have told Martin that it will take much of next year to sell excess inventory, and that will push a real rebound in home building into 2010. For most of the Carolinas, the slump won't be as severe as the national one, but there are still too many unsold homes. Many potential home buyers remain on the fence, watching for signs that we've hit bottom.

“If job growth starts to pick up, you'll see home sales pick up,” Martin said.

ON FORECLOSURES: The Carolinas have less exposure to the big surge in foreclosure filings nationally, mostly because the region never saw a huge runup then a steep drop in home prices, as others did. In Florida, California and other states, the price pullback has limited homeowners' ability to refinance. Except for some parts of the Carolinas coast, “we haven't really had a huge home equity hit,” Martin said.