Economists Betting On NO Recession… Me Too!

While the Wall Street Journal continues to report that nationally markets are in turmoil and housing prices continue to sag, I’m seeing stronger activity in the Boulder real estate market. The Journal says there’s still a lot of talk that a recession is all but inevitable.

One could make a case that the national economy might avoid a painful downturn. While the national news media published information that unemployment was at an all time high of about 5% what many chicken-little types failed to notice was that the local Colorado economy is fairing much better. Consider the data from the U.S. Department of Labor for the Boulder area.

Boulder Unemployment brief historical rundown:

Oct ’07: 3.0%

May ’07: 2.8%

May ’06: 3.6%

May ’05: 4.4%

May ’04: 4.6%

May ’03: 5.7%

May ’02: 5.3%

May ’01: 2.8%

We were hovering around the mid 2%’s in 1999 and 2000 (the hay-day for real estate price booms in Boulder valley) and now we’re only at about 3%… let’s keep in mind that while the national news media likes to make hype out of many issues it also rarely if ever understands the local or regional economy or job market. So for those of you out there thinking that the Boulder market represents what’s going on in the rest of the national economy, you’re dead wrong. You see the trend? We’re moving into a pattern of growth both in jobs and real estate appreciation for this year. When the rest of the nation was trending opposite us, as usual and on a tremendous up-swing in recent years, the Boulder area was seeing it’s ‘adjustments’ in real estate pricing and unemployment issues 2 to 4 years ago.

We can talk all day long about isolated markets and we should. What’s going on in Longmont vs. Boulder, or what’s happening in the Brighton area, Weld county anyone? or perhaps even Fort Collins? But let’s keep it close to home and more on-topic: Boulder real estate. If you’re inside the “moat” the rules of supply and demand still apply and real estate prices remain strong.

Now, back to the national picture.

The Fed Is On The Case. The Fed is expecte to ease its main target for short-term interest rates through the middle of this year to cushion the economy from housing and credit woes and officials are working to ease the credit crunch and encourage banks to keep lending to worthy borrowers. (that’s a key phrase: worthy borrowers) Although I think Mr. Barnes and I agree that the ability of Mr. Bernanke to make the correct moves, for the right reasons at the right time is speculative, at best.

Strong Global Growth Is Propping Up The U.S. Economy. Global economic growth has raised demand for good from the U.S. This offsets softer domestic consumption. There are emerging markets which buy more than half of the U.S. exports, and they’re continuing to grow even as industrialized economies are cooling.

The national housing downturn’s pain will continue but it has already done much of its damage to growth. For most of the last 10 years or so, residential construction has been a significant driver of economic growth. When housing’s contribution dropped substantially on a national level last year, the share of economic growth due to residential-sector investment is so low that it doesn’t have much room to cut the GDP any further, one would think.

Government spending remains strong. Spending by state and also local governments is contributing about 25% of the GDP growth based on date through 2007 and this is just prior to an election year. You think officials will make cutbacks in an election year. I don’t.

While the odds of a national recession have risen and some question the national economy experts are predicting that there will be sunny economic skies by middle of this year.

With the local economy driven by high demand as people continue to remain attracted to the Boulder area due to good jobs, low unemployment, and high quality of life if the national forecasts are for sunny skies the local economy is certainly due for great things.


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