Thursday, March 22, 2018

National Economic Outlook - March 2018


Written By: Ingo Winzer, President of Local Market Monitor, Inc.

March 22, 2018:  One reason a lawyer might pay off a porn star with a home equity line rather than a credit card is that interest rates on credit card balances are very high, around 15 percent at a time when inflation is only 2 percent. The high rates are needed partly because banks constantly have to write off credit card balances that are uncollectable. This can be a big deal - the 2008 recession pushed 'charge-off' rates over 10 percent.


Current charge-off rates are around 3.5 percent, far from the danger level, but they have been increasing - back in 2015 they were below 3 percent. And the other part of the picture - credit card delinquencies - have also risen, from 2 percent to the current 2.5 percent.

This news isn't yet ominous, but it could quickly become so because of the outsized role that consumer debt now holds, both in the profitability of banks and in the ability of consumers to keep spending money. Regulators will focus on the stability of the banking system, but the bigger problem will come from the consumer side. We don't know at what level delinquencies and charge-offs will become dangerous because consumers have never carried so much debt, it's new territory.

Jobs in February were up 1.6 percent from last year, pretty much the same story we've seen in previous months. Jobs were up 1.8 percent in manufacturing, 2.4 percent in business services, 1.9 percent in healthcare, and 2.2 percent at restaurants. There was a very small increase in retail and in government.


It's too early to know how much of an impact the recent tax restructuring will have on jobs or income.

Tuesday, February 13, 2018

National Economic Outlook - February 2018

Written By: Ingo Winzer, President of Local Market Monitor, Inc.


Measured by Gross Domestic Product the economy grew 2.3 percent in 2017 - better then 2016, not as good as 2015. As usual, the spending of individuals was 80 percent of economic activity.

What GDP doesn't tell us is how much risk is building up. We don't have to look back very far - only ten years - to know that spending is just one part of the equation. If the spending that drives the economy is only funded by more and more debt - or by the illusion of wealth from higher and higher home prices - it can't go on forever.

It would have been difficult to measure the risk created by the sub-prime mortgage boom as it happened, and in the same way it's difficult to put our finger on what the next big risk to the economy might be, but here are a couple of prime suspects: consumer debt and a new real estate bubble.

We don't know how much consumer debt is dangerous because we're in uncharted territory - even adjusted for inflation and the growing population, it's never been higher. Setting aside the $14 trillion of mortgage debt, other consumer debt in the shape of credit cards, car loans, home equity loans and student debt is close to $4 trillion - about $11,000 for every man, woman and child in America. It's doubled since 2000 and it's shooting higher as we speak. At what point will consumers no longer be able to borrow?

We're all too familiar with the other potential risk, a real estate bubble, but that doesn't mean we can do anything about it. So far, a boom is underway in only a couple of dozen markets - Denver, Miami, LA, San Francisco, Seattle, Dallas, Austin, Charleston among them - but a lot of people live there and how will they change their spending habits when home values drop ten percent?

Total jobs in January were up 1.5 percent over last year. Jobs were up 1.5 percent in manufacturing, 2.3 percent in business services, 1.9 percent in healthcare, and 2.2 percent at restaurants. Jobs were flat in retail and in government. Unemployment stayed at 4.1 percent.

Tuesday, January 16, 2018

National Economic Outlook - January 2018

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

One of the bright spots of the economy is the financial sector. For the last several years jobs in finance increased at a steady pace of almost 2 percent per year; there are now almost a million more than in 2010. These are mainly well-paid jobs - over $70,000 per year - that boost the real estate market.

While these jobs still increased 1.6 percent in 2017, this is slower growth than just last year. Because these jobs are associated with individual transactions in banking, wealth management, debt management, insurance, and real estate itself, they are very susceptible to automation and internet replacement.

With ballooning personal debt on one side and high invested wealth on the other, the financial sector is larger than ever, but the future of jobs in finance is likely to be less rosy. This by itself isn't bad for real estate, it's just another indicator of the future tilt towards more renting.

The ascent of the financial sector is itself a potential liability because it's built on ever larger amounts of debt. The last time around, Wall Street offered good returns through securities backed by risky mortgages. The same pressures for high returns can easily produce similar risks when so much other debt is floating around.


Jobs in December were up 1.5 percent from last year, in line with recent growth levels. Manufacturing jobs were up 1 percent, jobs in retail and government again were flat. Jobs were up 2.5 percent in business services, 2 percent in healthcare, and 2 percent at restaurants. Unemployment remains at 4.1 percent.

Wednesday, December 27, 2017

National Economic Outlook - December 2017

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

In previous economic cycles, the performance of the US economy could be measured by the growth or decline in jobs. No more. By measures like corporate profits or GDP, the economy is doing well today, but job growth keeps slowing down. What gives?

In a word, computers. The greater use of computers and information technology keeps displacing workers. This phenomenon isn't new - computer-controlled machines have been around a long time - but has accelerated with the build-out of the internet. Ironically, one of the strongest effects can be seen in the information sector itself, where jobs are down 2 percent over the past year. We all know that newspapers have been losing jobs, but that now extends to the movie and TV industries and to telecommunications.

It's difficult to know where this process will end. What will these displaced workers do instead? They can't all be retrained for high-tech jobs, especially since high-tech jobs themselves will eventually be relentlessly pared down.

In the meantime, the real estate industry is likely to follow the auto industry, where more and more vehicles are leased because fewer customers can afford to buy.


In November, jobs were up 1.4 percent from last year. Jobs were up 1.5 percent in manufacturing,1.8 percent in finance, 2.7 percent in business services, 2 percent in healthcare, and 2.1 percent at restaurants. Jobs in retail and government were flat. The unemployment rate is bumping along at 4.1 percent.

Tuesday, November 14, 2017

National Economic Outlook - November 2017

Written By Ingo Winzer, President of Local Market Monitor Inc.

Local data for October aren't available yet, but the overall effect of the hurricanes in Texas and Florida on jobs will probably be transient. Overall, jobs in the US in October were up 1.4 percent from last year, up from 1.2 percent in September and in line with previous months.

This doesn't mean the affected local markets will snap back. In both the Houston and Miami areas about 15,000 jobs were lost. (In Puerto Rico, the devastation is so great that no data at all are available.) Ironically, although the Houston economy may recover faster as refineries get back on-line, Miami will probably have a more complete recovery. Even before the hurricanes, growth in energy-dependent Houston had been slow - almost zero in 2016 - while growth in South Florida has been high for years, buoyed by foreign capital.

The hurricanes came on top of a national economy that the Fed says is going great guns but in terms of new jobs has been steadily slowing. Last year job growth was 1.7 percent, the year before that 2.1 percent. This year 1.5 percent is the new normal.


In October jobs were up 1.4 percent from last year, including (on a very positive note) 1.2 percent in manufacturing, 2.5 percent in business services, 1.9 percent in healthcare, 1.9 percent at restaurants, and 1.8 percent in finance. Retail jobs were down a half percent and government jobs were basically flat. Unemployment in October was 4.1 percent.

Tuesday, October 17, 2017

National Economic Outlook - October 2017

Written By: Ingo Winzer, President of Local Market Monitor, Inc.

The job data for September show some of the effects of the recent hurricanes. Overall, job growth slowed to a 1.2 percent annual rate - down from the 1.5 percent of previous months.

The drop was mainly due to a loss of jobs in retail and at restaurants, as you would expect in storm-ravaged areas. But the big question for the national economy is what comes next? Sure, rebuilding in Texas and Florida will provide a temporary boost in construction-related jobs, but will all the old jobs eventually reappear? The Houston area and Southern Florida have been among the fastest growing parts of the country for decades, so we can expect they will again - eventually.

But outside calamities can also accelerate trends that had been in the works for some time. Storms and floods and fires - because they provide an opportunity for individuals and businesses to re-assess their situation - can be a tipping point for local economies, just ask New Orleans. And with the national economy already running slower, it won't take much for weakness in one part of the country to spread to others through lower demand for goods and services, a lot of which depends more on psychology than immediate need.

Too cataclysmic? Probably. But my job is to anticipate things that might happen, and in a fragile economic environment any number of things can quickly have effects much bigger than we would have thought. Before 2008 who would have guessed the world economy would be felled by sub-prime mortgages?


In September, jobs were up 1 percent in manufacturing, 1.8 percent in finance, 2.6 percent in business services, 2 percent in healthcare, 1.4 percent at restaurants - and were down 0.4 percent in retail. Unemployment was 4.2 percent.

Tuesday, September 12, 2017

National Economic Outlook - September 2017

Written By:
Ingo Winzer, President


Local Market Monitor

Why do the monthly economic statistics matter to long-term investments in real estate? It's partly a matter of timing - you'd prefer not to make an investment just as the economy is tanking. But aside from spotting the infrequent recession, investors can dissect current performance to take advantage of the strategic changes that will affect their long-term decisions.

One of the ongoing changes in the current economy is the rapid drive for efficiency fostered by computer technology, which has eliminated many jobs altogether and allowed others to be done overseas - probably the biggest dislocation since technology began eliminating farm jobs a hundred years ago, when most people lived on farms. The TYPES of jobs now being eliminated (or created) - and where they're located - has an enormous effect on the types of housing people need. The bifurcation of incomes - more high, more low, not as many in the middle - is also an opportunity for investors who can identify where and how real estate demand is restructuring. It's easy enough to SAY these changes are taking place, but translating them into actual investment decisions can only be done effectively by finding the fine print in the short-term statistics the government so generously supplies.

Jobs in August were up 1.5 percent from last year, this seems to be the new normal in 2017. Jobs were up 1 percent in manufacturing, 2 percent in healthcare, 2.5 percent at restaurants, 3 percent in business services, and were flat in retail and in government.


For those who like very early warning, jobs in finance were up 1.8 percent - lower than the 2.3 percent rate earlier this year. Growth in finance jobs peaked 18 months before each of the last two recessions.