"Playing Ball in the Later Innings"
SEPTEMBER 15, 2016
Mark Dotzour Ph.D. Economist
Former Chief Economist of the Real Estate Center, Texas A&M University
Seminar Hosted by the Society of Industrial and Office Realtors, Houston/Gulf Coast Chapter
Dr. Mark Dotzour delivered an insight seminar on the current state of local, regional and national economies, with an emphasis on the stable national expansion buffering the local downturn. Some key points of his presentation include:
• At 87 months, we are in the seventh inning of the current economic expansion that began after the Great Recession.
• U.S. economy still growing, but at slower rate.
• On average, economic expansions last 58.4 months, the longest having been 120 months.
• Recessions tend to last on average 11.1 months.
• Gross Domestic Product (GDP) has steadily declined during economic expansions from 6-8% after WWII, to ~3.7% during the 1991-2001 expansion, to less than 3.0% during the 2001-2007 expansion, and then about 2% for the current expansion from 2009-2016.
• Little U.S. inflation until one year after the oil downturn bottoms.
• Political uncertainty will remain until April 2017.
• Commercial real estate continues to remain attractive investment until an alternative arises.
• Job growth still strong, with some tendency toward higher wages.
• Higher wages can lead to stronger economy with consumer spending, and increased inflation and interest rates.
• Vehicle sales are up to levels just prior to the Great Recession.
• Single family housing and associated construction remain the primary metrics to not fully recover since the Great Recession, representing a potential bump to sustain current expansion.
• Manufacturing cycle has peaked.
• Century to date, Texas, California, and Florida maintain the highest job growth rates.
• Texas economy appears more diversified than other energy states which are in negative economic territory while Texas holds on to weak but still positive growth.
• Houston Business Cycle Index shows clear signs of declining in recent times.
• We are likely to see in the near term the end of credit super cycle, that is the continued decline and low levels of mortgage and treasury rates. While not likely to see $100 per barrel in the near future (if ever again), U.S. production has become exceptionally efficient through this downturn to the point that profits can be seen as low as $37 to $40 per barrel.