The state of the economy today is all in the mind – and that’s official.
Boffins from the world of commercial real estate convened for the annual Counselors of Real Estate pow-wow in Miami this week agreed that, with the myriad of data available today, people just pick and choose what they want to think.
“It’s all relative,” said Anthony Pierson, CRE, managing director, portfolio management at Cornerstone Real Estate Advisers LLC and a member of the prestigious Counselors’ organization.
“There is so much data, so much information, people just pick and choose.”
This situation contributes to uncertainty and affects consumer confidence, with marked divides that are not necessarily representative of economic reality.
Pierson said that with the stock market back to pre-recession levels and many business sectors experiencing significant gains, improvement is relative to past performance during the recession – not absolute.
In a humorous moment, he said if parents have children who are recent college graduates that have found “good” jobs, they tend to be hopeful, believing the economy is well on its way to recovery.
Yet in absolute terms, the unemployment figures do not indicate a fully recovered economy.
“If your recent graduates have moved back home and cannot find jobs, your beliefs about the economy are decidedly not hopeful,” he said.
Raymond G. Torto, Ph.D., CRE, global chief economist at CBRE, pointed to solid gains in real estate appreciation.
While real estate value is currently not matching the price levels of pre-recession 2007, property investment is now outperforming the stock market and is expected to continue to rise, he said.
“So you can look at the picture negatively, or you can look at it as ‘we’re getting better,’” he continued, underscoring the importance of state-of-mind in national economic confidence as well as investment choices.
Noting reasons for “hope” about the future of the real estate industry, Pierson said the U.S. is on an expansion path to grow from its current population of over 300 million to 400 million by 2043. The country will continue to place within the top five most-populous countries in the world well into the next century.
“This underscores the demand for land use planning and development, which fuels the real estate engine,” he said. He also reminded the audience that he is hopeful because the U.S. has now experienced 32 months of consecutive economic growth.
A continuing theme throughout the program sessions was that the U.S. real estate market is improving but that recovery is uneven.
Both Torto and Pierson pointed out there are regional differences in all the reports, from unemployment to real estate. Pierson said a bright spot is that the U.S. continues to attract strong real estate investment from both domestic and non-U.S. investment sources despite continued capital market uncertainty.
Consumer confidence and attitudes are clearly affected by location, education, profession, credit score and many other factors, they noted. “It’s the absolute vs. the relative; the data vs. personal experience,” Pierson said.
For example, the unemployment rate is relatively high, despite improving since the depths of the recession. But in contrast, employers continue to complain they cannot fill key positions due to lack of qualified workers.
Through analysis of U.S. unemployment figures compared to advertised jobs reported in data at The Conference Board Help Wanted Online (HWOL) website, Torto showed that the U.S. employment market is experiencing a significant skills mismatch. The gap is persistently wide between professional and service/production positions compared with available jobs in those categories.
The result: some segments of the U.S. find the job market is “hopeless” when, in fact, it is their skills that are not aligned with the capabilities companies need.
Torto explained that while economies always have some degree of skills-to-jobs mismatch, the gap today is troubling because of factors including large numbers of unskilled or, as he called it, “old skilled” workers, and portions of the workforce unable to relocate to a different city for a new position because of current housing market conditions.
He showed that there are many more jobs available in skilled professional categories – healthcare, computer and mathematical sciences, architecture and engineering fields – than there are unemployed workers who are qualified for the positions. “You can’t blame the economy for that,” he said.
Then, demonstrating the disagreement in data about the state of the economy among many sources, he produced quotes from other studies that contradict the HWOL skills mismatch report, including those by the Chicago and Boston Federal Reserve Banks and the International Monetary Fund.
In conclusion, the experts agreed: if one seeks to answer the question: is there hope – or no hope – for the U.S. economy? It depends who you ask.