No end in sight of sluggish economic growth

Labor Day has come and gone. Are we back to work? Are we ready to kick-start this anemic economy?Some might be eager to pull forward, but things still seem lean and quiet, at least in real estate.One recent Investment Outlook Newsletter started out, “Growth has clearly slowed from the earlier rapid pace of recovery. Economies can and do hit a temporary wall to recovery. This wasn’t the result of an excessive inventory build so much as a ‘perfect storm’ of exogenous developments which hit at a time of heightened vulnerability and tempered confidence, moderating spending and investment plans.”Say what? I may be presumptuous to try to interpret, but folks ain’t spending because they have no idea what is going on in the economy and the folks in Washington are not inspiring investment at any level.The same newsletter goes on to say, “The just-endured Great Recession was a product of a credit bubble which led to excessive household debt and major housing overbuild. It is the unwinding of these legacies that are time-consuming.” Exactly! But “time-consuming” means we simply do not know how long it will take to climb out of this hole.Economist Jeff Thredgold wrote, “In my view, American businesses and consumers maintain spending close to the vest as they are extremely wary of the enormous and costly expansion of the government now underway.”While most pundits feel the possibility of a double-dip recession has eased, “the potential of a more vibrant expansion is muted as the headwinds of weak residential and commercial real estate values, high unemployment, low confidence levels take the bloom off the economic rose,” said Thredgold.The current rate of U.S. job creation has made only a very small dent in the more than 8 million jobs lost in 2008. Keep in mind, the economy must add more than 130,000 net additional jobs each month just to meet the needs of a growing population – and to keep the nation’s unemployment rate from rising. Beyond jobs, remember that nearly one in four U.S. homeowners is underwater on their mortgages, owing more than their homes are worth.So where are we? According to Thredgold, “Sluggish U.S. economic growth remains likely, with no shortage of serious domestic challenges. Modest global growth also remains on tap.”Since the downturn in late 2008, both the Bush and Obama administrations have thrown borrowed money at the problem. Trillion dollar annual deficits will come home to roost sooner – not later. We must get control of spending. President Obama has the misfortune to be elected in a soft economy, both domestically and globally, so expanding government spending is not supported by tax revenues.We are asking and/or allowing the government sector to spend more than we give them in revenues. But the future does not show surpluses to pay this sudden debt off.Rise of the SouthNationally – and somewhat at the state level – we are using credit card number three and number four to make interest payments on credit card number one and number two. To fight the deficits we need more taxes, but more taxes stifle the private sector on both research and development and job creation. Hence, many folks ponder deflation or stagflation.Here at Norton Asset Management, we are working on a couple of projects in North Carolina. The Carolinas seem to be doing very well, at least in the Research Triangle/Raleigh, Durham, Chapel Hill and Charlotte markets. Houses are selling, there is immigration of workers, new homes are built, companies are hiring.Will it last? Hopefully yes. But the Southern states’ gains likely come at the expense of other regions – including the Northeast. Land costs, taxes, utility costs, costs of housing, wages and the demographics of age and education are moving south. The Northeast needs to ignite the fires of entrepreneurism and global competitiveness.Alas, the United States and the globe are fiercely competitive, so this will be a mean and lean recovery. Does anyone have any ideas? If so, I’m eager to hear them. nhbrBill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Facilities Management Administrator (FMA) with the Building Owners and Managers Association. He can be reached at wbn@nortonnewengland.com.