or 2009, surviving will be admirable enough.
What started as a U.S. financial chill has turned into a worldwide freeze of historic proportions. "The most dangerous financial shock in mature financial markets since the 1930s" is how the International Monetary Fund put it.
With the U.S. auto industry teetering on the brink of collapse and federal bailouts still in the rollout stages, recovery seems a more achievable goal for 2010 - the latter half.
Here's the outlook for the nation and key sectors in the Philadelphia region:
The U.S. recession, officially one year old, already has run longer than average for the post-World War II era. U.S. joblessness will get worse before it gets better. IHS Global Insight Inc. foresees its peaking at just above 8 percent in early 2010.
U.S. exports, a key element of economic activity, "will be in negative territory" by the third quarter of 2009 and not likely to return to positive terrain until the third quarter of 2010, says Nigel Gault, an IHS Global Insight economist.
U.S. housing starts, another key indicator, fell 4.5 percent in October from September, to a seasonally adjusted annual rate of 791,000 units - the lowest level for any month since at least 1947. Some economists expect the rate to drop to 720,000 units by summer 2009 as excess houses are sold. A rebound to 1.08 million is considered likely in 2010.
- Diane Mastrull
The coming year will not be Shangri-La. But it should not be a complete disaster, either, thanks to a diverse economy, said Steve Wray, executive director of the Economy League of Greater Philadelphia.
It is the benefit of not having all your eggs in one basket.
"We're not the financial capital of the U.S. or the aerospace capital of the U.S.," said Rich Stein, the league's research director.
Said Wray: "What we have to continue to do is leverage those assets we have. We have to keep our eye on both fixing our current issues, but keeping an eye on where we want to go."
- Diane Mastrull
Of most concern about 2009 among community college administrators is what Karen Stout, president of Montgomery County Community College, called "almost a perfect storm." Just as more students flock back to school in the bad economy, public funding is diminishing - county and state allotments make up nearly 60 percent of MCCC's budget - thus necessitating a tuition hike "at a time when families can't afford" one.
Last year, tuition went up 2 percent, but "as the economic situation becomes more tenuous, it will be hard to keep a tuition increase that low," Stout said.
Yet keeping the doors open to all who want to enroll is essential, she said, "because we are part of the economic stimulus. When jobs come back, we will need to have people trained and ready to fill those jobs."
Applications for the spring semester are up 15 percent over last year; enrollment, 12 percent.
At Ursinus University in Collegeville, a tuition increase also is likely, probably close to 4.5 percent, said Richard DiFeliciantonio, vice president for enrollment. There, school officials are cutting spending where possible - on studies abroad, food service, maintenance and evening programs - to deal with the expected increase in requests for financial aid.
"The long-term fund-raising and endowment stuff, that's the shoe yet to drop," he said.
- Diane Mastrull
When people lose their jobs, they often lose their health insurance, as well. When employers feel strapped, they buy policies with bigger deductibles and co-pays, or they drop coverage altogether.
That may leave fewer subscribers for such insurance companies as Cigna Inc. and Independence Blue Cross, the latter pegging its hopes next year on a merger with Pittsburgh's Highmark Inc. And hospitals and health systems such as Thomas Jefferson and the University of Pennsylvania may end up with fewer patients who have good private insurance, their best payer. Meanwhile, the demand for Medicaid increases just as tax revenue declines. On top of that, hospitals' investments are suffering as everyone else's.
Around the nation, hospitals are seeing a decline in admissions and an increase in bad debt - uncollectible bills for services. Patients may be delaying treatment because they cannot afford their part of the bill. Or, said Mark Pauly, a health economist at the Wharton School, they may think it's a bad time to miss work. "You may not want to take time off . . . if you're afraid you might be laid off," he said.
Alan Zuckerman, president of Health Strategies & Solutions in Philadelphia, said he expected to see consolidation and some hospital closures.
Hospitals typically will start by closing unprofitable units or reducing payments for training, said Lawton R. Burns, director of the Wharton Center for Health Management and Economics. Delayed expansion plans and administrative cuts also are likely.
"Smart hospitals will be making plans now to adjust," Burns said.
- Stacey Burling
Next year finally will bring the end of a three-year slump in housing prices in the Philadelphia region and across the country, economists say.
The decline from the peak in the second quarter of 2007 to the trough at the end of next year is projected to be 15 percent in Philadelphia and its Pennsylvania suburbs, according to Celia Chen, an economist at Moody's Economy. com in West Chester.
Citing the Fiserv Case-Schiller Home Price Index, Chen said conditions in South Jersey were worse, with average prices - in line with the national trend - likely to bottom out late next year at 30 percent below their peak in 2006.
The persistent slide has Toll Bros. Inc., of Horsham, biding time, luxuriating in a cash stockpile and cutting its developments to 255 from its peak of 325 in early 2007.
Residential real estate has been at the center of the nation's economic maelstrom, but its commercial cousin could start wreaking more havoc for banks as the recession victimizes more tenants of office buildings and shopping centers.
- Harold Brubaker
Could it get worse? Regrettably, yes, even after the nation's biggest banks went through historic collapses and consolidations in 2008, such as Wells Fargo & Co.'s takeover of Wachovia Corp.
For all banks, the outlook for earnings growth is dim because of light demand for loans from strong business customers and mounting expenses from bad loans made to marginal businesses during the boom.
For example, the combined operations of PNC Financial Services Group and the soon-to-be-acquired National City Corp. have one of the highest exposures to shaky commercial real estate among the nation's biggest banks, according to Citigroup Global Markets.
Worth watching next year is how banks that applied for investments from the U.S. Treasury, such as National Penn Bancshares Inc. and Harleysville National Corp., compare with those who kept their hands in their pockets, such as Beneficial Mutual Bancorp Inc. and Univest Corp. of Pennsylvania.
- Harold Brubaker
If the next six months look anything like the last six - and economists predict as much - retailers are in for even more bankruptcies, layoffs and bad news overall.
Total retail sales for everything but automobiles and gasoline next year are forecast to be less than they were in 2008, according to Moody's Economy.com.
The current 2.5 percent sales growth forecast for 2008 would already make it the worst year since at least 1993, said Scott Hoyt, senior director of consumer economics for Moody's Economy.com.
Consumers, stunned by layoffs and the loss of value in their homes and retirement accounts, have cut back on shopping, instead stashing their cash into savings accounts. And experts do not expect consumer spending - the biggest single driver of the national and regional economy - to rebound until people believe that their wallets are safe again.
"I think we'll see a continued flow of bankruptcies," Hoyt said, "probably a particular wave after the holiday season."
- Maria Panaritis
The prognosis for the drug industry is poor. Patents on blockbuster drugs such as Lipitor that propelled big pharmaceutical companies through the last decade are expiring in the next few years. A slower economy already seems to be cutting into prescription sales.
As a result, drug companies have been cutting thousands of jobs - Merck & Co. Inc., GlaxoSmithKline P.L.C. and Wyeth all announced layoffs - and millions in costs to compensate for declining revenue.
Companies have pursued different strategies to succeed in this less buoyant era. GlaxoSmithKline, for example, is banking on revenue from consumer products such as Aquafresh toothpaste to diversify its revenue from pharmaceuticals, which include Advair and Flonase. Merck still hopes for a big boost from its Gardasil vaccine, although the company has had trouble producing enough of it.
There is one perverse bright spot. So many other industries are in such bad shape that pharmaceutical companies may generate better returns than other investments. Deutsche Bank AG analyst Barbara Ryan recently told investors: "Relative earnings for the drug group could be favorable for the remainder of the year, and remain stable, while forecasts may continue to fall for many other more cyclically sensitive groups."
- Miriam Hill
Oil prices are a double-edged sword for the energy industry. High prices slow demand, but they still can boost profits, though the equation looks different to a refiner such as Philadelphia's Sunoco Inc. than to oil-rich competitors.
"They like to say that they don't widen their margins, but when you've got a $100 barrel of oil and your margin is 10 percent, you're making $10. When it's $50, you're making $5," said Joel Naroff, chief economist for TD Bank N.A.
Naroff said the whole energy sector faced lingering effects from this year's spike in oil prices above $147 a barrel, even though some analysts expect prices to stay in the $40 to $50 range next year.
"People are going to be much more cautious in their use of all types of energy," Naroff said.
Lower oil prices mean lower feedstock costs for much of the chemical industry, a boon to companies squeezed as commodity prices rose. But the slowdown also causes pain by cutting demand.
- Jeff Gelles
For the first time in years, law firms in 2008 saw a sharp falloff in revenue growth to single digits. They are likely to see more of the same in the months ahead.
Some are considering reducing capital spending and year-end bonuses to associates. But while firms around the country have begun trimming their lawyer ranks, few layoffs have been reported among Center City firms - though that could change if industry consultant Robert Denney's projections for 2009 bear out.
"For most firms, revenues are going to be flat," Denney said.
Bankruptcy, a staple for law firms during tough economic times, has so far failed to produce the gusher of fees many expected because failing businesses are increasingly resolving problems outside the courtroom in so-called prepackaged bankruptcies.
An uptick of business is expected, however, as businesses seek to offset falling revenue by suing over failed transactions.
Denney and other analysts said there was some evidence that small to mid-size firms had been more successful in weathering the economic storm because their lower rates had suddenly become more appealing to corporate legal departments that were under pressure to cut costs.
- Chris Mondics
A weak dollar and global economic slowdown have depressed shipments to the Philadelphia ports.
The Philadelphia river terminals owned by the Philadelphia Regional Port Authority had a strong 2006, but a weaker 2007. Export activity had been strong, and included Pennsylvania-made steel. But exports could not offset weaker imports. The falling dollar makes foreign-made goods more expensive.
Still, there is hope. The Philadelphia port is a major entryway for foreign beef served as hamburgers in restaurants. And a growing sector is imports of Uruguayan frozen beef.
The port is also eagerly anticipating major infrastructure projects that could result in more ships doing business here. They include the planned deepening of the Delaware River channel and the widening of the Panama Canal. The latter would provide greater access by Asian cargo ships to Philadelphia.
Nearby, at Philadelphia International Airport, Charles Isdell, director of aviation at the Philadelphia Airport, expects flat passenger traffic this year and a 5 percent decline in 2009.
But in recent years and in the current recession, Philadelphia has preserved its airport operations more than have Cincinnati, Pittsburgh, St. Louis and Las Vegas. These cities lost airport capacity because legacy carriers curtailed hub operations, or because they were heavily dependent on leisure travelers.
- Bob Fernandez
Unclear is how well this region's tourism, arts/culture and hospitality industry will fare as the public finds itself with fewer discretionary dollars and corporate travel spending tightens.
According to some estimates, the U.S. hotel business is likely to drop as much as 20 percent through 2009.
PKF Hospital Research in Atlanta is projecting an average occupancy rate of 58.3 percent for U.S. hotels in 2009 - the lowest in 20 years.
In the arts and culture community, the big unknown is how the stock market's havoc on individual and foundation portfolios will affect donations. The nonprofit sector is a sizable part of the local economy, accounting for 40,000 jobs and $158 million in taxes, said Peggy Amsterdam, president of the Greater Philadelphia Cultural Alliance.
Nancy Burd, a consultant to the arts community, said she had been advising clients "to rethink your business model . . . decide what's profitable and what isn't." That may result in the extinction of some groups and mergers of others, she said.
Those still in business a year or two from now will be better off, she said.
- Diane Mastrull
Information technology may be able to weather the fallout. IT "is often looked at as a way to decrease the cost of operations and lower the risk of operations and improve productivity," said John Carrow, an executive at Blue Bell-based Unisys Corp., the largest IT company in Pennsylvania and in need of a good turn itself.
The contraction of the financial-services industry is also expected to be a boon for IT companies as data centers and other aspects of merged banking companies need to be consolidated.
Likewise, the cable TV industry offers a rare area of optimism, largely because of broadband, said analyst Craig Moffett. "The cable operators are positioned not just with the best broadband pipe," he said, "but also with the lowest marginal costs." It is expected to remain that way for much of the next decade despite competition in limited parts of the country by telephone companies - such as Verizon's planned entry with FiOS service into Philadelphia, where Comcast Corp. dominates.
But the slowdown will be less kind to the region's media sector.
Consolidation will be the trend of the next 18 months, predicts industry lawyer Lloyd Zane Remick. That will range from station mergers to sharing of resources, such as video footage shot by helicopter news crews, already under way here. Gone are the days when television news and radio personalities could go into contract negotiations with a sense of "entitlement" for a salary increase of 20 percent to 40 percent, he said. Now, job security is the goal.
At newspapers, the inability to substantially grow circulation and advertising continues to force cuts in staffing. Experts are forecasting a 15 percent drop in advertising revenue for all newspapers in 2009. Web advertising will grow slower - up to 15 percent rather than 20 percent.
- Diane Mastrull