News
4 LESSONS FROM THE RECESSION
May 1, 2012
| There may be a recovery. But it sure doesn't feel like one. And Mercer University's prophetic economist Dr. Roger Tutterow predicts we won't likely even see jobs return to pre-Great Recession levels for another two years. ?When you drop as much as we did (8 million jobs), it takes not months, not quarters, but years to get back where we were,? he says. | ||
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| Roger was the keynote at our 3rd Annual Atlanta Real Estate Summit at the Ritz-Carlton last week. (Thanks to sponsors Arnall Golden Gregory and Reznick Group.) He notes that manufacturing has improved and consumers are spending again, but many manufacturing jobs won't ever come back due to technological advances and consumer confidence is very ?fragile.? He also outlined four lessons we learned from the Great Recession: | ||
| 1. OIL PRICE HIKE = TAX | ||
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| With oil shooting up to $80/barrel in 2008 (and only rising from there), energy's inflation acts ?like a tax on the economy,? Roger says. While oil now hovers around $100/barrel, he says that in and of itself does not pose a threat to the economy. And in fact, there's probably a $10/barrel premium to the costs because of Iran. But if costs go up more, that could hurt GDP. | ||
| 2. FED BOND BUYING BUFFERS TAX HIKES | ||
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| Roger says the idea that the Fed keeping short-term borrowing ?effectively at zero? as a way to boost the economy ?didn't pass the smell test? for him. Instead he suspects the Federal Reserve is attempting to lock in long-term bonds at low costs to buffer us eventually when rates will rise to pay our national debt service. He sees the Feds beginning to consider rate hikes next year. ?The Fed has gotten lured into feeling it has to solve every problem in the world with monetary policy.? We snapped this pic of David Rubenstein and Fed Chairman Ben Bernanke back in 2009. | ||
| 3. ATL RE VALUES HIT WORSE THAN US | ||
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| We all know that home and CRE values took a hit during the Great Recession. But, Roger says, it was even worse than people could imagine. Residential alone took a 94% valuation nosedive in the metro area during the bust. ?It is hard to overstate what that did to the Atlanta economy,? he says. But he says the housing sector does have a bright spot, especially multifamily. The Echo Boomer generation are ?perfect candidates? to feed both the apartment and eventually home ownership markets here, a sentiment echoed by North American Properties' Mark Toro (also a panelist, above), who says there are going to be more 22-year-olds on Planet Earth than in any time in human history. (Which must mean get into the denim and ironic sunglasses industry.) | ||
| 4. TIME TO GET "FISCAL HOUSE" IN ORDER | ||
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| ?We cannot do again what we did last summer,? Roger says, referring to the government's threat to shut down the government and floating fears the US would default on some of its Treasury securities. Nonetheless, the national debt is a huge burden that must be solved, Rogers says. ?Where we stand now is we have to get our arms around our fiscal house? to add confidence back into the private sector, he says. | ||
