Mostly Cloudy, 61°

Economy is at full stride

Posted

Comment

While there is a lot of drama going on in the country between people groping other people, Trump saying weird things about Pocahontas and the University of Tennessee hosting a reality show about how to not hire a head coach, it turns out the economy is killing it.

It’s easy to see success around the metro area. There are cranes almost everywhere you look. The Congressional Budget Office just released statistics that show the U.S. economy is operating at full stride. So the success you are seeing here is for real.

The study in the report measures the economy’s potential to produce goods and services based on the supply of people working and how productive they are. The conclusion is that we are doing the best right now with what we have.

Economists measure the productivity of our workforce by determining how much product the average worker can produce. They can then multiply that times the number of people in the workforce and determine our economy’s potential to produce goods and services. As it turns out, our production – measured in Gross Domestic Product, was actually slightly more than our potential.

We are essentially right where we want to be. This is a good thing if you are happy with where things are. But if you want faster growth in our economy – where do we go from here?

If we start overproducing from what economists believe is our maximum potential, then experts say the economy will overheat. Which means that banks and businesses would start being careless in their lending and spending. Right now, we basically have full employment and the supply is meeting an honest demand. An economist in a recent Wall Street Journal article called it “the sweet spot.”

The same article also reported that many economists believe an economy operating beyond its potential will put pressure on product prices and worker wages to increase. This is welcome news for the Federal Reserve, whose governors have been concerned with the stubbornly low inflation numbers we’ve been seeing.

This could also be welcome news for our housing market. I just listened to a real estate industry expert who predicted that a 4 percent increase in wages would set loose a home-buying spree across this country. He pointed to statistics that show that we only buy houses after our salaries have increased from where they were when we first bought the houses we are in.

It’s an interesting theory. In the metro area, there is less inventory right now of houses priced under $400,000 than in any other time since folks started recording inventory levels. It’s almost the opposite case for homes priced over $500,000. There is an overabundance of inventory in that market. If wages increased, and people started moving up, you could see a slew of new inventory flood the market in the starved sub-$400,000 range, as people who own homes in that range list their houses so they could buy in the above $400,000 range.

As we head near the end of this year and the beginning of the next, you can expect to see articles predicting greatness in 2018. It’s happened almost every year since I started paying close attention to the economy. I’m not sure if this is born out of hopefulness or if it’s a strategy to try to create some inertia going into the new year.

The truth is, if we want to see a significant jump in growth, if we are operating at full stride, we’ll need a new product or market to appear. The internet created a huge market in the late 1990s that took years to fill. Is there something bigger on the horizon that will instantly create an expanse of capacity?

If I knew, I’d be a hard man to find. As it is, I’ll enjoy living in Roswell and waking up every day doing the best with what I’ve got.


View desktop version