2023 marked MCB’s 9th Annual Economic Outlook event with Dr. Terry Clower. Moving from in person to a virtual format in 2021, it continues to be full of fascinating insights and engaging conversation, and has grown in popularity every year.
As in years past, Dr. Clower started his presentation covering the national economy, discussing the GDP’s continuing recovery. Due to a slowdown in the first two quarters of the year, many pundits have claimed we are experiencing recession. Dr. Clower, however, is not quite convinced of this, commenting that time will tell as these determinations are made in hindsight. He went on to remind audience members of the factors the National Bureau of Economic Research considers in order to make its determinations:
- How deep is the downturn;
- How wide is it in terms of sectors of the economy covered; and
- How long does it last
Dr. Clower next discussed the employment picture nationally. He referenced solid job growth numbers, pointing to recovery in terms of employment growth. He addressed the concern around tech layoffs, as this topic is making national news daily, by commenting: “that is a fraction of what they have added in the last three years, so they expanded greatly, and they over-expanded.” To illustrate his point, he referenced this statistic: 20% of all of Amazon employees worldwide have been added in last two years alone.
Regarding the unemployment rate — where we are now is historically a very low unemployment rate for the nation, but labor availability problems still exist. He mentioned workers, especially in the hospitality and leisure sector, who left the workforce due to the pandemic but have not returned, largely due to childcare and elder care affordability issues. He reiterated the well-documented fact that the downturn has affected the female workforce disproportionately.
In wrapping up the jobs conversation, Dr. Clower also cited this statistic: there are still over 800,000 more job openings than there are people looking for work in this country.
Dr. Clower went on to discuss consumer confidence; it took a dip and has now stabilized a bit, but is starting to trend down with inflation. He also talked about interest rates, saying the “era of really cheap interest rates is done.” With respect to mortgage rates, he feels they will probably stay elevated, adding: “if you were waiting to get a 3.5% 30-year fixed mortgage, you’ve waited too long.” This has led to an almost 37% drop in home sales across the country from November of 2021 to November of 2022.
In referencing healthy retail sales statistics, he commented – “Our retailers are absolutely brilliant at figuring out ways of separating us from our money.”
Regarding the stock market, Dr. Clower predicted that it will continue to be incredibly volatile throughout the year; by the end of year, he anticipates slight growth – and anticipates 2024 will be better.
Overall, with respect to the US economy, job growth will turn negative in the second to third quarter of this year, and interest rates will remain high, which will be tough on businesses. He anticipates the US will head into shallow recession sometime mid year (not deep or dramatic). Ending his national economic insights with a little bit of optimism, he added, “I do see growth returning in 2024.”
Dr. Clower went on to discuss the Washington, DC metro area economy. He said the DC area is continuing to work toward recovery but “unlike the nation we have not recovered to pre-pandemic levels of employment.” He spoke about the challenges of filling jobs in healthcare and hospitality and also talked about the drop in federal government employment, attributing that in part to retirees who are not being replaced.
Dr. Clower also addressed the weaknesses in the commercial real estate market and concern about the long-term competitive position for our region — attributing a lot of this to labor availability issues.
Discussing the trending population loss in our region, he cited the unfortunate fact that we have prime age millennial workers leaving the area due to housing affordability/inventory issues and transportation frustrations, commenting: “This is really challenging our region and holding us back on growth.” He also spoke to the fact that young people are no longer interested in working on Capitol Hill. That trend is a detriment to our long-term access to this younger demographic, who would come to Washington, DC to work on the Hill and stay in the DC area in the years following, seeking employment in government or private industry.
Always interested in audience insights, Dr. Clower fielded a variety of questions at the end of his presentation. To view the presentation in its entirety, click here.
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