DES PLAINES, ILL. — When reflecting on the future of the economy and its recovery, sometimes it’s good to look back. For instance, one of the lessons learned from the pandemic of 1918 was that people will make up for lost time, says Scott Brown, chief economist for Raymond James. “That’s one of the reasons we had the Roaring ’20s.”
Brown’s remarks came during the opening session of CORFAC International’s virtual spring conference on Wednesday, March 17. Brown hosted an hour-long panel on what’s driving the economy as well as the outlook for commercial real estate performance.
Americans have made substantial gains in consumer spending on durable goods, according to Brown. Examples include the sales of motor vehicles, which have trended upward. Year-over-year increases in the consumer price index are likely to reach 3 percent this spring, but that is viewed as a rebound from low figures a year earlier.
Inflation has risen to 2 percent and is on track to moderately exceed that figure. Keep in mind that government debt does not drive inflation, pointed out Brown.
According to the economist, stimulus checks have not fueled a great deal of spending as Americans have utilized 70 to 80 percent of the checks for paying off debt or adding to savings. But the extension of unemployment benefits could be a bigger factor. The $300 benefit that the federal government added back in January will last until Labor Day.
As of February, the U.S. unemployment rate sat at 6.2 percent, which translates to 9.5 million jobs less than February 2020. Since the U.S. typically adds about 2 million jobs per year in a healthy economy, the figure is really 11.5 million jobs below where it should be, according to Brown.
“A key issue of the recovery is going to be matching people with jobs and getting people back to work,” said Brown.
Most of Brown’s discussion on the various commercial real estate property types centered on the office sector. Work-from-home will likely be an ongoing phenomenon and will have a bigger impact in large cities, Brown predicted.
“Why would you want to commute an hour anymore if you can work from home? A lot of that demand is just not going to come back,” said Brown.
Smaller markets with less traffic and less density are likely to see demand for office space come back at a healthier rate. Additionally, Brown doesn’t expect it will take too long before we begin to see what the real future of office will look like. A lot of office users are beginning to make those decisions on their spaces now.
Overall’s Brown’s outlook was promising, rooted in growth in both consumer and business confidence. The only curveballs could be if new strains of the virus are not responsive to the vaccines or if there is resistance from Americans to get vaccinated.
CORFAC’s conference continues through Thursday, March 25. Des Plaines, Ill.-based CORFAC is a global network comprising privately held commercial real estate firms.
— Kristin Hiller