It was the unique nature of the worst economic meltdown since the Great Depression that has made the recovery process a painstakingly slow one, says one of the nation’s leading economic analysts.
Speaking at the recent Labor Management Cooperation Initiative (LMCI) Finishing Industries Forum in Las Vegas, Clifford “Cliff” Brewis, the senior director-dodge editor for McGraw-Hill Construction, says that history has shown that bouncing back from financial-driven recessions such as the one that ravaged the U.S. in recent years is considerably more difficult and time-consuming.
“This was a financial-driven recession,” he said. “The difference between a financial-driven recession is that it affects wealth and wealth doesn’t come back right away.”
Brewis cited the key housing industry as an example of the deep extent to which damage from a financially-driven recession can reach, noting that housing prices plummeted anywhere from 40 to 60 percent in some market areas at the recession’s nadir in late 2009 and early 2010. Things have improved since then, but housing prices remain nowhere near where they once were, Brewis said.
“It’s certainly not coming back at the same pace that we lost that wealth,” he said. “That’s very inherent in this type of recession, so it takes longer to kind of stretch out the recovery.”
Nevertheless, Brewis’ overall economic forecast for 2014 and beyond was positive, citing continued growth in the housing sector, more favorable employment numbers and less economic uncertainty as reasons for calling for more measured economic growth, including a projected 9-percent spike in the total construction industry.
“I really think we have the potential to be in another nice, long run in terms of construction and in terms of activity,” he said.
Yet, the nature of the recession, Brewis said, also means the recovery will be a private sector-driven one that has revealed itself to be easily adversely affected by the slightest economic uncertainties, such as the related problems in Europe, the “fiscal cliff” political battle in Washington, D.C., and the ongoing federal budget questions.
The public sector will continue to invest money in projects regardless of peripheral events, Brewis said, but those in the risk-adverse private sector tend to get nervous about such happenings and pull back to the relative safety of the sidelines.
“There has to be more reliance on confidence in the marketplace for activity to take off,” Brewis said.
Recovery has been slow, but uneven across the country, he noted. Areas buoyed by oil and natural gas activity such as Texas, Minnesota and the Dakotas have thrived as of late and now represent the top third of America’s top commercial performance. Other areas such as the “Austin to Boston” corridor have done well, although not quite as favorably as the areas rich in oil and natural gas.
Continuing to struggle are Nevada, Arizona, parts of the southeast and most of Florida, Brewis said. In Nevada alone, 62 percent of all house were still underwater a year ago, Brewis said, meaning those people have lost considerable wealth and are likely unable to purchase any big-ticket items such as new cars or take vacations anytime soon. The nation’s recovery from the recession won’t be complete until all Americans have begun getting up of the ground, Brewis said.
If that is to happen, the housing industry will be the key, Brewis said, because it pulls so many other industries along with it, including the glass industry.
So far, so good as residential construction – mostly multifamily units – fuels the construction resurgence and mandates the need for the additional hiring necessary for sustained economic growth.
That’s good news for everybody.
“Housing all across the country is turning up more positive,” Brewis said. “Expect to see significant increases.”