National Economic Outlook - March 2020

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

Although I'll quote the latest data on jobs (from February) events have already overtaken the statistics. The spread of the corona virus threatens to have a dramatic effect on the US economy. And not just in the short run because the economy already had been trending downward. That's the big problem when growth is slow, any number of unforeseen circumstances can tip it into a tailspin.

Although government officials apparently worry mainly about 'liquidity' in the banking system and propose financial assistance for companies in some industries, the real problem is that consumers (70 percent of the economy) are quite likely to pull back on their spending habits, which can lead to a vicious cycle of perceived economic insecurity that ends in a sharp recession.

It's difficult to imagine a quick turnaround from this and I think the effects will be felt in real estate for some years. First, interest rates will be at rock bottom. This means both that investing in real estate will be cheap, and that the returns on rental properties will be better than most other investments. Second, the home price bubbles in a dozen US markets will come to an end, which will encourage more investment in rentals. And third, the population of renters will increase because fewer people will have the financial confidence to buy a home.

Jobs in February were up 1.6 percent from last year, the best performance for months but wasted in the face of the corona situation. Jobs were up 1.9 percent in finance, 2.0 percent in business services, 2.2 percent in healthcare, and 2.7 percent at restaurants. Jobs were essentially flat in manufacturing and retail, and up 1 percent in government. My bell-weather - temp jobs - were down 1 percent, already indicating a slowing economy.

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National Economic Outlook - January 2020

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

Retail sales for 2019 were up 3.6 percent from 2018. With inflation running around 2 percent, that means a real increase of 1.6 percent or so. Car sales were good and on-line sales were terrific (up 13 percent) but when you subtract out inflation, every other sector did poorly - furniture stores, food stores, hardware and lumber stores, drug stores, electronics, sporting goods.

It's difficult to see this scenario changing in 2020, not just because of Amazon but because consumers are already up to their ears in debt - where will they get the money?

Total jobs in December were up 1.4 percent from the previous year, pretty much in line with the performance of recent months. I don't see a better picture in 2020, it's much easier to see slower growth. While a recession in 2020 is unlikely, the low growth of the economy means it can quickly slide if shocks of one kind or another (trade wars, real wars, political wars) make consumers cautious.

Jobs were up 2.5 percent in healthcare, 2.3 percent at restaurants, 1.9 percent in business services, 1.4 percent in finance, 0.7 percent in government, and virtually flat in retail and manufacturing.

Temporary jobs, a category that can include secretaries and clerks as well as doctors and engineers, and that served as a leading indicator before the 2008 recession (but also fell in 2016) is now in negative territory.