The continuing threat of a European recession could have a chilling effect on Ohio?s economy, based on a recent report from Wells Fargo Securities, which determined Ohio is among 20 states at ?high risk? of an economic slowdown tied to the debt crisis in Europe.
A European recession could stifle U.S. exports and stall the domestic recovery and job gains that have helped bring unemployment in Ohio down to its lowest level in nearly four years, said Mark Vitner, a senior economist at Wells Fargo.
?A slowdown is pretty much inevitable because Europe is already slipping into recession, and that?s likely to last right through the middle of next year,?? Vitner said.
?It?s not something that?s likely to tip the U.S. into recession, but it may cause growth to be a little slower than folks expect in 2012,? he added.
The European Central Bank earlier this week said it would loan more than $640 billion to European banks at super low interest rates to encourage the banks to help bail out governments drowning in debt.
But most economists still expect the euro zone economy to show little or no growth next year, which could hurt U.S. production and manufacturing employment.
European countries accounted for 19 percent of Ohio?s total exports of $41.1 billion last year. And more than 362,000 Ohio jobs ? or about 8 percent of all private sector employment ? are linked to manufactured exports, according to the latest figures from the Ohio Department of Development.
In Ohio, manufacturers of factory equipment, chemicals, computer and electronics products would be most affected by a European recession, Vitner said.
Rich Porter, president of Union-based TE-CO, which makes equipment such as vices and clamps, said he?s keeping an eye on the situation in Europe, especially fluctuations in the currency that binds the 17-nation euro zone.
The debt crisis has driven?down the value of the euro against the dollar in recent weeks, and a weak euro makes U.S. exports more expensive.
?We?ve been benefiting from a weak dollar for about the past two years,? he said. A strengthening dollar ?would definitely affect our exports to Europe. They would decline.?
Initially, though, a European slowdown wouldn?t have much impact on the company, which sends about 5 percent of the products it makes in Ohio and 30 percent of goods produced in New Hampshire to Europe.
?We would work less overtime; watch our cost structure more closely,? he said. But ?I don?t think it would be a big enough impact to change head count or delay expansion.?
Still, a protracted downturn like the most recent U.S. recession could lead U.S. exporters to take more drastic measures, Vitner said, though it?s too early to tell exactly what the consequences might be.
?It?s not something we?re going to see right away,? he said. ?It?ll take some time to show up in reduced orders and export flows. It?s probably something that we?ll begin to see in the numbers around the spring of next year.?
Mike Dillon, president of Germany-based Seepex Inc.?s. U.S. operations, said the maker of industrial pumps with a plant in Enon isn?t overly concerned about the euro zone?s problems.
?As one economy becomes weaker, other economies will strengthen,?? Dillon said. ?We?re already selling more products to China, and we?re also seeing that in Latin America. Yes, we do expect to see Europe decline,? he said. But ?Being diversified is the key to our strength.?
Thomas Speh, director of MBA programs at Miami University?s Farmer School of Business, said the euro zone?s impact on Ohio would also be mitigated by the size of the Buckeye State?s trading partners. ?The good news, in my opinion, is that most of the trade from industries in Ohio is done with more stable countries in Europe,?? he said. ?They?re better off than most of the rest of the European Union.?
But Speh doesn?t expect Ohio to go unscathed.
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