National Economic Outlook
By Ingo WinzerJuly, 2023
The rate at which the economy is adding jobs keeps slowing, fortifying the view that a fair amount of these jobs are recovered pandemic jobs rather than new ones. In January the annual rate of job growth was 3.3 percent, in March 2.7 percent, and in June 2.4 percent. At some point we’ll reach a flat rate than can be sustained for the next few years; it’s most likely to be well under 2 percent, as it was for the 10 years before 2020, when the pandemic hit.
That’s not necessarily a bad thing, gross domestic product increased about 2 percent a year during that period; but it points toward a future economy that is much more vulnerable to external forces such as energy prices, supply-chain imports, or internal political factors – not even counting disruptions due to climate change.
In such a scenario real estate markets also will be more vulnerable to disruption, as the home price boom and sharply higher interest rates have already demonstrated. For one thing, it’s likely that incomes have fallen behind inflation, which means that fewer people can afford to buy a home and more people will need to rent.
In turn this means that future demand for real estate will be higher in cheaper markets, where businesses will relocate in order to attract employees – as was the case for years in Texas, Utah and Idaho, for example. Bankers, investors and home builders will need to think about such strategic shifts.
As part of the 2.4 percent overall growth of jobs, compared to last year, jobs were up 2.5 percent in construction, a very modest 1.2 percent in manufacturing, 0.5 percent in retail, 1.1 percent in finance, 2.1 percent in business services, 3.7 percent in healthcare, 4.4 percent at restaurants, and 2.8 percent in government.
Have questions that you would like to have answered in the next NEO presentation? Please submit questions here.