No double dip recession, says economist at AAMA conference
"We don't see a double dip [recession]," said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis, Claremont Graduate University, Sept. 26, at the 2011 American Architectural Manufacturers Association National Fall Conference. The meeting runs through Sept. 28 in Palm Springs, Calif. "Growth will be very slow, but we don't see the economy falling back into recession," he said.
During his keynote presentation, Adibi outlined the economic challenges of 2011. The economy has faced, and continues to face, notable hurdles this year, he said. These include the debt crisis in Europe, high oil prices due to political unrest in the Middle East and North Africa, the Japanese earthquake and tsunami, the state's budget deficits, and the federal deficit and debt. Adibi said the debt issues in Europe and the United States pose the most siginificant challenges and could affect the slight economic growth that is occurring. "The economy is growing, and if these [governments] get their acts together, we'll be fine," Adibi said. If problems and uncertainty continue, the forecasted growth in 2012 could stall.
Gross Domestic Product is headed upward, and Adibi forecasts GDP growth of 1.7 percent this year and 2.8 percent next year. Consumer spending is also on the upswing, with forecasted growth of 2 percent this year and 2.6 percent next year.
Despite some growth, the economy remains far below peak, however. "When economists call this the Great Recession, they have good reason," Adibi said. "We saw job losses fall more than 6 percent, and GDP down more than 5 percent."
One area still far below peak is housing construction, and the sector won't return to peak levels in the foreseeable future, Adibi said. "Housing starts went down to 554,000. We've leveled off, and things are going up. Percentage wise, the [rate of] growth is not bad. The base is the problem—the base was so bad," he said. Overbuilt markets and high unemployment continue to stand in the way of more housing growth as well. "You don't get meaningful recovery in housing unless jobs come back. If people don't have jobs, they can't buy homes," he said.
However, there are areas of opportunity in housing, including the remodeling market. "People can't sell their homes and are realizing that, if they're going to be stuck, they should make changes—get new windows, a new kitchen," Adibi said.
He added that the large home market is lagging. "If home values go down, it will be values for expensive homes. There are so many $1 million and $2 million homes sitting on the market," he said.
Adibi also touched on the office segment of commercial construction. "Looking at the national averages, the office vacancy rates are leveling. But, we're not going to see much commercial investment coming back [in new office construction]. To build new, we have to have a much greater improvement in vacancy rates," he said. "Don't count on commercial [office] coming back this year or early next year."