Local Market Monitor's National Economic Outlook for September

 

Local Market Monitor, a National REIA preferred vendor, recently released their National Economic Outlook for September, 2018 where they share their thoughts on developments taking place in the U.S. economy.  This month they warn about consumer borrowing and the banks and politicians that are seemingly incentivized to encourage it.

National Economic Outlook – September 2018

September 20, 2018
By Ingo Winzer

I’ve been harping about consumer debt for a while now because I think it will cause the next recession. It won’t trigger it, that will be some unrelated event, but all of a sudden people will realize they can’t spend any more money. Here are some facts. Adjusted for inflation, ordinary consumer debt – that is, not including mortgages – is now $12,000 per man, woman and child in the US, up from $4,000 in 1980. That’s equal to 40 percent of income, mainly in the form of credit cards and student loans. It used to be 20 percent.

The problem I see is that banks – which formerly made their money from businesses but now make it from consumers – have every incentive to encourage people to borrow more and more. And politicians have every incentive to help the banks do it.

With no natural brake on the system, where will it end? When debt is 50 percent of income, 80 percent? Or maybe it will never end and we’ll have a larger portion of the population spending less and less, while an ever-smaller, wealthier one spends more and more. That would be a social and political disaster.

Jobs in August were up 1.7 percent over last year. They were up 2 percent in manufacturing, 2.6 percent in business services – the main driver for the economy right now – 2 percent in healthcare, and 1.6 percent at restaurants. Jobs in the retail sector struggled slightly higher after a disastrous year, while jobs in government were again essentially flat.

Jobs in the construction sector were up 4 percent. This may seem like a big deal, but it’s not. After a decade of empty homes and fewer people who can afford to buy – and despite the new boom in California – the construction industry is still smaller than it was ten years ago.

Don’t miss what else Ingo has to say about the economy this month.
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About the Author: Ingo Winzer is President of Local Market Monitor, and has analyzed real estate markets for more than 20 years. His views on real estate markets are often quoted in the national press and in 2005, he warned that many housing markets were dangerously over-priced. Previously, Ingo was a founder and Executive Vice President of First Research, an industry research company that was acquired by Dun and Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in Finance from Boston University. He resides in Cambridge, Massachusetts.

 

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