NH and the U.S. need to face reality

Bill Norton

This is my second column for NH Business Review this year. In the first, I deliberately tried to avoid too much prognostication, as there are so many moving parts (“variables”) in both the U.S. and global economies. I did say (have been saying and continue to say) that there is likely to be some level of correction or “reset” in 2020. A majority of pundits (60%-70%) don’t agree with me.

Janus Henderson, a large investment firm, recently wrote, “In our opinion, growth and inflation will remain quite low for the foreseeable future.” Think about that. Low inflation is a good thing, unless you are a pensioner trying to squeeze more income out of your retirement funds. But low growth, defined as less than 2% per year, is not such a good thing.

First off, there are more of us – the U.S. is growing by 3 million to 5 million people per year. But even so, unemployment is at an all-time low and employers cannot find workers, especially good, qualified, educated and motivated workers.

For the last several years we have seen flat to negative productivity growth. Employers complain that getting workers is hard and getting good workers is very hard. I am on job sites every week. The pace here in the Northeast is not great. Monday mornings are especially challenging, with absenteeism and tardiness. Due to the large drop in the labor pool following the Great Recession, employers, for the most part, have been ratcheting down their expectations. Specialty trades, such as electricians, plumbers and HVAC techs, are most scarce.

But this extends beyond construction to manufacturing, logistics and even high-tech. We need significant gains in productivity to spur/boost the economy. Annual consumer price index growth of 1% to 2% is hardly treading water.

I have been describing the current economic doldrums as “tepid.” Yet the longest U.S. expansion is not over despite many shocks – most global, including an emerging pandemic (which will have a big “tail” in 2020 into 2021).

A fashion company here in in New England is very concerned about this as 30% to 40% of its finished product comes from China, and it takes time to restructure the supply chain.

So, we are in a “flat spot” – somewhat similar to stagflation with slower growth – but no one knows how slow and for how long. A recession is not likely as long as the trade war with China does not escalate. And with the coronavirus, China may not be able to rattle their sabers.

There is plenty of global capital – in fact, more Chinese capital is likely to flow overseas, thus projections for U.S. interest rates are for them to move lower. The irony is that this cheap money, from a historical perspective, is feeding rising housing prices both for sales and rents. But when relatively new apartments in northern New England are selling for $200,000 per unit to $220,000 per unit, something has to give.

A key point is that we are not in control of our future in this regard, and neither is the executive branch, Congress nor the Fed. We are riding a global economy.

But the ship has not run aground, so we continue to avoid taking on health care access and affordability, higher education debt and quality, public education and affordable housing, to name a few.

Here in New Hampshire, we need to acknowledge our high cost of living which makes retaining young workers very challenging. This is acute because we are the tied as the second oldest state, with Vermont. The demographics don’t lie. But what does this matter when we might lose our first-in-the-nation primary status!

Bill Norton, president of Norton Asset Management and an honorary member of AIANH, is a Counselor of Real Estate (CRE) and a Facilities Management Administrator (FMA). He can be reached at wbn@nortonnewengland.com.