With the elections behind us now, economists are firming up their predictions for 2013. The consensus seems to be another year of stagnant to slow growth for the U.S. economy tied to a carryover of uncertainty. Predicting the actual rate of growth becomes a bit of a guess as a result, with gross domestic product estimates ranging from 0.5 percent to 4.4 percent.
Whether Congress can reach a bipartisan deal to avert the Jan. 1 “fiscal cliff” of automatic federal budget cuts and the expiration of George W. Bush’s tax cuts is one factor in this uncertainty. So is the possibility of changes in the 2013 tax code. European debt problems and an economic slowdown in China are part of the mix as well. Capital flight and an uptick in wealthy Americans pulling out and putting their money in other countries immediately after the election is compounding economists’ concerns.
Real estate investors seem to be keen to this and have been making long-term bets in categories that tend to do better in recessions or stagnant growth circumstances. Apartment properties, mobile home parks and other forms of affordable housing can assume more Americans will be held in the rental pool longer, so they are appealing. Discount retail does well in tough times, too, so there’s opportunity there. Office properties are holding up in Seattle with the massive expansion of Amazon.com in South Lake Union. But outside of the central business district, nothing much has changed. Held up with historically low interest rates, the housing market could weaken again if interest rates go up, which many economists expect within the next 24 months.
Underneath this uncertainty is a growing concern about younger Americans. Unemployment is highest among those 18 to 35 years old. Some are college educated and carry student loan debt. Others are just getting by. With older Americans likely to remain in the workforce longer in uncertain times, fewer jobs open up and the cycle continues for younger ones. Only at the high end of the GDP growth rate estimates are enough jobs created to gain ground on unemployment. Losing the most productive of these younger Americans to other countries is a new concern as they seek opportunity.
What the long-term effect on the economy will be of a generation without the natural upward mobility associated with advancing stages of life is another worry. Dubbed Slackers, Echo Boomers or Gen Y, this group is earning another label they’d probably rather not have: The Left-Behinds.
Uncertainty tends to breed uncertainty, so the first two quarters of 2013 are probably as important as any. Revising forecasts mid-year might be wise. If the geo-political environment changes, the massive amount of corporate and private liquidity that has been sitting on the sidelines may get into the game and that could make things better quickly.
But with a political season that produced essentially no changes, Americans should not be surprised with an economic forecast that predicts more of the same.
Tom Hoban is CEO of The Coast Group of companies in Everett. Contact him at 425-339-3638, firstname.lastname@example.org or [URL]www.coastsvn.com;http://www.coastsvn.com[URL].[/URL]