Houston Economics Club Speaker Series: Dr. Lynn Reaser
On Thursday, March 25th, I attended a luncheon/speaker series hosted by the Houston Economics Club, the local chapter of the National Association of Business Economics. The speaker was Lynn Reaser, PhD, the current NABE president and Chief Economist at the Fermanian Business & Economic Institute. She spoke on “The Economic Outlook: Will the Headwinds or Tailwinds Prevail?”. During her presentation she discussed topics such as the global outlook, the U.S. economy, the financial markets, and the economic outlook for Texas and Houston.
Dr. Reaser stated that she believed we would see job gains in 2Q10 and that unemployment would dip below 9.5% in 2010. Inflation would be subdued at less than 2%. She spoke of the debt being shifted from the private sector to the public sector and the continual deepening of the federal deficit. She believes that there are several risks to the recovery: a) oil prices, China, and sovereign risk are estimated are as 10-15% risk and b) terrorism and commercial real estate are estimated at a 15-20% risk.
Dr. Reaser also spoke of the changes that she believes may become permanent within the economy, including:
1) emerging markets taking the lead, as China is set to over take Japan as the 2nd largest economy by the end of 2010,
2) government debt will continue to escalate, and
3) people will continue to have less trust in the markets.
During the question and answer portion of the discussion, Dr. Reaser answered several inquiries:
1) Audience: Will we see a slow down in FDIC takeovers of small banks?
Dr. Reaser: The take overs will slow down by the end of 2010/beginning of 2011; however, small banks are currently still exposed to commercial real estate and this will result in takeovers throughout 2010.
2) Audience: Please give your opinion on the 3-5 year horizon for the economy?
Dr. Reaser: Recoveries usually last a decade. Growth of the federal debt will constrain growth. Higher interest rates will decrease growth rates. The Fed could be facing increased inflation and perhaps another asset bubble.
3) Audience: Where will the growth come from?
Dr. Reaser: The growth will not come from commercial real estate as that market is still declining. Consumer spending will increase 2-3%. Business will start to increase spending on deferred techinology spending. Housing spending will increase. Government spending will also play a role.
4) Audience: What will be the impact on tax rate increases?
Dr. Reaser: The people in the $200 – $250K+ tax bracket will be impacted. It will cause a slowdown in the growth rate.
5) Audience: Where do you see increases in the jobs market?
Dr. Reaser: It will be broad based: manufacturing, healthcare, retail, homebuilding, financial services, technology services, etc.
6) Audience: With what is occuring with state deficits and job losses in places such as California, will the private sector be strong enough to offset the job losses?
Dr. Reaser: The private sector should be strong enough to offset the losses.
7) Audience: What will be the role of the healthcare bill on the economy?
Dr. Reaser: The healthcare bill does not improve the quality of care or reduce the cost.
8) Audience: Is the healthcare bill going to hurt small business?
Dr. Reaser: The states will have to increase taxes to offset the cost. It will increase the tax burden for small businesses.
Dr. Reaser’s presentation can be found on The Houston Economics Club website: www.thehoustoneconomicsclub.org.
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Katherine E Avery has experience supporting consulting services for pension fund and institutional investment clients. Ms. Avery has experience in underwriting and consulting for over $2.5 billion in commercial real estate assets.
