American Architectural Manufacturers Association

U.S. Economic Outlook Update Given at AAMA’s National Fall Conference

During the 2011 AAMA National Fall Conference, Dr. Esmael Adibi provided an update on U.S. Economic Outlook and how the European debt crisis, the turmoil in the Middle East and North Africa and the federal and state budget deficits are negatively impacting the weak economic market we are experiencing. As director of the A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis at Chapman University, Adibi provided answers on the outlook of the job and commercial real estate markets and the overall forecast for the upcoming year including any hope for signs of resurgence.

According to the Chapman University Economic Forecast, the unemployment rate was reported at 10.1 percent at the close of the first quarter in 2011. As such, fewer jobs directly correlate to a negative impact on consumer confidence and spending. Various factors influencing the rate of growth of the Gross Domestic Product (GDP) include monetary and fiscal policy, government purchases and consumption, investment and exports; the GDP in turn affects the progression of employment, inflation, long-term interest rates and corporate profits. In his presentation, Adibi specifically identified “GDP and employment as the most important recession indicators.”

The economic update attributed the weak financial market to the steady loss of jobs and falling home prices since 2008, with expectations that declines will continue to bottom out for an extended period of time.

In addition to pinpointing construction and finance as the job engines that drove economic growth between 2003 and 2006, Adibi remarked that manufacturing jobs have been experiencing weak markets and thus are expected to decline in the future. The keynote speaker also went on to note that the chances of a recovery will be hindered without the overall support of consumer spending.  

In regards to what some consider the “housing bubble,” Adibi stated that we have been experiencing a housing bubble for several years now.

Similarly, he noted that “concern of a bubble stems from three other factors – the popularity of adjustable-rate mortgages, the large number of real-estate investors and second-home buyers and the problem of affordability,” which continues “to be devastating.”

He feels the housing bubble is devastating due to the demand for more jobs, higher income and a decreased mortgage rate in direct comparison to the unfavorable supply for permits and unsold inventory. As such, the annual rate of change for reselling single-family housing prices is forecasted to decrease by 1.4 percent next year. 

Moving forward, the challenges we face as a nation include proceedings in the Middle East, North African political unrest and inconsistent oil prices, the aftermath experienced from the Japanese earthquake and the debt crisis in Europe; in addition to our nation’s deficit and debt, including individual state’s budget deficits. Noting that “our recovery after each recession is getting slower,” Adibi concluded by encouraging attendees to remain vigilant in their company’s finances and develop reasonable plans for combating the recession.

Thank you to our Silver Sponsor, Amesbury, and to all our Fall Conference sponsors for making this event a success.

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