Economy Looks Strong Five Years Out: Onsite Coverage
LAS VEGAS — Over the next three to five years, the U.S. economy is expected to be on the upswing.
Mark Zandi, chief economist at Experian’s Moody Analytics, shared that message Tuesday during a session at the American Credit Union Mortgage Association’s annual conference, which is taking place this week at the Encore in Las Vegas. The meeting kicked off Sept. 14 and wraps up Sept. 17.
Zandi focused his optimism on an easing of fiscal policy away from austerity and towards a more neutral stance on spending, a need to ramp up home building again and the overall strong fundamentals in the U.S. economy regarding cost structures and profitability.
He presented data that showed spending by governments did not fuel the U.S. economy, but acted as a drag of roughly 1.5% on economic activity due to the economic austerity of the last few years.
“As economic austerity moderates and government spending, particularly for defense spending, begins to increase, that will help government spending begin to contribute to economic growth rather than weigh it down,” Zandi estimated.
On home building, Zandi told ACUMA conference attendees that the U.S. needs to build roughly 1.7 million units of single and multifamily housing per year. However, for the last few years, the rate of new housing has yielded around one million units.
Zandi pointed out the U.S. will need to address that 700,000 per year deficit at some point, particularly as new households form.
Based on economic research, those new housing units will generate 2.1 million new jobs or an additional 1.5% of the labor pool over the next three to five years.
“The housing sector runs very deeply unto the U.S. labor market,” Zandi said.
The country currently has very strong economic fundamentals including an overall business cost structure that is among the lowest in the world, the lowest per unit energy prices in the world, and a financial system on very strong footing after having weathered the Great Recession, he noted.
“We have figured out and corrected the mistakes that got us into that mess,” Zandi said, adding banks’ return on assets is currently close to 1%, which he considers a strong and sustainable rate of return.
“These aren’t the high profits of the time before the crash that were the results of the real estate bubble and the tech bubble,” Zandi said. “But we wouldn’t want to see those return anyway.”