Don't expect a housing crash anytime soon, says economist
DOWNEY -- Today’s economics suffer from a constant focus on the wrong questions and issues, according to one economist.
Financial Partners Credit Union hosted its second annual Gateway Cities Economic Forum last Thursday at the Rio Hondo Event Center, featuring economist Christopher Thornberg as its keynote speaker.
Thornberg set the tone early, making it clear that his speech would not surround current economic policies in Washington D.C.
“It’s amazing all the things we’re not talking about because, of course, all our conversations are wrapped around what’s happening on a day-to-day basis in the White House,” said Thornberg. “To think of Trump as a cause is a mistake; he’s not a cause, he’s an effect. He’s president in large part because he basically rode into the office [due to] the incredible partisanship that existed prior to him even arriving on the stage. We have to remember he’s a reflection of these underlying problems in our party.”
“Thirty years ago we would agree as a nation on what the problems were, but we would debate on how to fix those problems. Today, the partisanship, the divide between left and right is so great that we can’t even agree with what the problems are.”
Much of Thornberg’s speech followed a theme of “asking the wrong questions,” however, he noted that “the economy is great” currently.
“The economy has been great for the last, four, five, six years. Things have been going at a very good, stable path,” said Thornberg. “This year, 2018, is all of 2017’s strong economy with the addition of fiscal stimulus.”
Thornberg added that he saw no chance of recession in the next 12 months, with a very limited chance of one in the next 24 months.
However, addressing the bad elements of the economy, Thornberg said that “we are debating issues that are completely irrelevant.”
“For example, we’re not talking about under investment and infrastructure. We’re not talking about rising wealth inequality. We’re not even having any serious conversation about healthcare cost inflation, pension and entitlement reform,” said Thornberg. “We’re too busy arguing about manufactured issues that don’t actually exist than to actually turn around and confront the problems that do.”
He added that while short-term he’s optimistic about the economy, he’s worried about the medium term.
One of the biggest issues facing the economy – and currently a big misconception – surrounds jobs.
“It’s not labor demand, it’s labor supply,” said Thornberg. “The unemployment in the United States right now is 3.9 percent…the job openings rate in the United States right now is 4.1 percent. In other words, there are more job openings than there are people looking for work. We don’t have a shortage of jobs, we have a shortage of workers.”
“We need to stop with the jobs conversation…we need workers, particularly qualified workers to fill those holes.”
Part of the solution, Thornberg says, is immigrants.
“If you want to debate how they come to this country, who comes to this country, fine,” said Thornberg. "But in the end, the right answer is more, not less. Anybody who think immigrants are a problem for our economy, you’re out of your mind. They’re part of the solution.
"If you don’t want them here…accept the fact if they don’t come our economy can’t grow fast…have the honest conversation.”
Some of the consequences of labor shortage include the increase of labor costs.
“Watch the corporate profits, watch the Stock Market because that’s where it’s gonna hit,” said Thornberg. “The other part of it…if you can’t hire someone, you got to buy a machine, and that’s what’s going on.”
Statewide, Thornberg claimed California to be the eighth fastest growing economy in the last five years.
“We’ve added 2 million plus jobs, 2.6 percent growth per year,” said Thornberg. “Our state output is growing faster than the national basis… Between 2012 and 2016, we added 1.3 million full-time jobs. Of those 1.3 million full-time jobs, 600,000 are paying over $100,000 a year…right now 18 percent of California households make over $150,000, compared to 11.6 percent for the rest of the nation.”
Still, Thornberg noted the slowdown in the rate of job growth within the region, and the related factors contributing it.
“The slowing we’re seeing boils down to a lack of bodies…if you don’t have a person, you can’t hire them, and we hit that wall,” said Thornberg. “Labor force is basically growing at a fairly slow basis.”
Some of this issue boils down to homes, or as Thornberg alluded to, a lack thereof.
“Everybody talks about housing, and you should. But how we talk about it is fairly important,” said Thornberg. “It’s not a bubble; bubbles are over-building or over-borrowing; nothing like that is occurring.
“We need more housing, and we’re just not building it.”
Last week's economic forum was the second put on by Financial Partners Credit Union.
“Our primary goal is to support our local economy and community through education and dialogue,” said Nader Moghaddam, Financial Partners Credit Union’s President and CEO. “This forum not only brought together many members of local Chambers of Commerce, city officials and businesses, but sparked conversation about how we can build and strengthen our local economy through regional collaboration.”