Leading indicators point to continued growth, says Stewart Title economist.
With all the media talk over a looming recession, is it time to start worrying about one?
The answer is an emphatic “no,” says Dr. Ted C. Jones, chief economist and senior vice president for Stewart Title Guaranty Company in Houston.
Citing economic indicators from real estate sectors, American industry and the larger economy, Jones told an audience of 185 people in North Port, Florida, earlier this month that virtually all major signs point to continued expansion of the U.S. economy through at least 2020.
90% of Americans pay less taxes today than they did before the Tax Cuts and Jobs Act of 2017.
Which two indicators stand out most? The U.S. recorded its strongest wage growth (3.0% in 2019) in 10 years; and the U.S. posted its lowest unemployment rate (3.6%) in 50 years as it added 2.1 million net new jobs in the last 12 months.
But Dr. Jones was just getting warmed up as he addressed the annual North Port Real Estate Summit at Suncoast Technical College in Sarasota County, Florida. Among other reasons why he believes a recession – defined as two or more consecutive quarters of negative GDP growth – is not happening soon, he cited these conditions:
- Every U.S. state showed positive job growth this year, led by Nevada’s 3.24% growth rate and the 3.05% rate recorded by Idaho and Utah.
- U.S. leisure and hospitality jobs are up 2.4% over the past 12 months, a sign that Americans still feel confident enough to spend considerable discretionary dollars on travel and tourism.
- Americans are now spending an additional $80 billion a year on real estate due to the Trump tax cuts.
- 37% of all homes purchased in 2019 were bought by millennials – the sixth consecutive year that millennials were the No. 1 homebuyers.
- Declining interest rates.
- Rising home prices.
- The U.S. economy has grown by 1.9% or greater in each quarter of this year.
- Retail sales are up 4.36% this year.
- September housing sales were up 6% over a year ago.
Other factors cited by Jones include cheap but profitable energy, a manufacturing comeback, and the fact that 90% of Americans pay less taxes today than they did before the Tax Cuts and Jobs Act of 2017, per USA Today.
So why do two-thirds of American adults fear that a recession could come next year, according to a recent CNBC survey? Jones says the fears are being stoked by media talk of a recession that is not likely to occur anytime soon.
“The U.S. recorded its strongest wage growth (3.0% in 2019) in 10 years; and the U.S. posted its lowest unemployment rate (3.6%) in 50 years as it added 2.1 million net new jobs in the last 12 months.”
A report by CBRE last week bolstered many of Jones’ observations. In its Nov. 14 U.S. Office Market Flash, CBRE noted that the third quarter of 2019 was the 40th consecutive quarter of U.S. office-using employment growth and 30th consecutive quarter of positive U.S. office absorption.
“The pace of this record-long expansion remains remarkably steady,” the report stated. “Year-over-year office-using employment growth in Q3 mirrored the 3-year average of 1.8%. Net absorption of 14.4 million sq. ft. in Q3 was 8% above the 3-year quarterly average of 13.3 million sq. ft.”
CBRE added that the technology sector is the No. 1 cause of demand growth. “Demand for U.S. office space has been bolstered by the ever-growing technology sector, which accounted for 22.1% of all U.S. office leasing over the past year,” the commercial real estate firm reported.
The top five metros for office leasing by technology firms in Q3 were Manhattan, San Francisco, Dallas-Fort Worth, Seattle and Chicago, according to CBRE.
