By David Houle| Sarasota Herald-Tribune
Last column I looked back at the forecasts I had made for the Sarasota-Bradenton area. This column I will take stock of the forecasts I have made for the U.S. and the world. In addition, I suggest some altered and new forecasts for 2020-2021 for the country.
(Readers, please understand that my responsibility is to be correct when looking into the future. I do not in any way like the fact that the economic forecasts below are truly some of the worst any of us have ever experienced.)
January 2020:"There will be a Democratic landslide in November."This was made before COVID-19, the murder of George Floyd and the lack of national leadershipin the U.S. about the virus. So, an even stronger forecast now.
March 2020: Due to COVID-19 the Dow will drop to under 20,000 and the global GDP will shrink 2-3% in 2020.Well, the Dow did drop below 20,000 before bouncing back up again. I think it may well go down again once the depth of the depression and the failure of America to stem the first wave of the virus is more apparent. (Note to active investors: when the major indices go down by 3-5%, liquidate short-term positions as a downturn from current levels might be well into double digits.UPDATE: The 2-3% prediction was before it was clear that the Federal government had no plan. New estimate is GDP down 10% in 2020.
April 2020: We have entered the first depression of the 21st century.No question about it. 2nd quarter GDP was down 33% from last year. I had forecast 30-40%. This collapse erased all the economic growth and employment gains from the last five years. The last time there was a decline like this was during the Great Depression. Same with the 20-30% total unemployment numbers, once all categories are factored in. The unemployment rate was never more than 10.6% in the Great Recession. It will continue to deepen in 2020, stay flat through 2021 and only see an end in 2022-2023 when collapsed structures and legacy thinking give way to the new.
April 2020: "Any inability to successfully contain the virus either first wave or second wave, or opening up state economies too soon, will only result in deeper economic damage."Clearly this is true based on all current data.
May 2020: "Global and U.S. GDP will decline by double digits, 2020 over 2019. Globally down close to $10 trillion." Updated forecast:U.S. GDP 2020 versus 2019 will be down 10% or some $2 trillion. Globally the same $10 trillion forecast, resulting in the global GDP being below $80 trillion.
June 2020:"The U.S. economy will have parts that will come back by 2021 and other that will take years to come back, if then."Given the COVID-19 spikes all across the U.S., I am not sure what will come back. An important distinction must be made between the politically oriented hype of how much has bounced back from April/May. The only comparablesare the month in 2020 compared with the same month in 2019. The annual GDP shrinkage is based upon that. Readers beware of politicians saying the economy is bouncing back."Ask anyone saying that how the 2020 quarters and 2020 months compare to same in 2019.
COVID-19 deaths are now around 160,000. They will be around 250,000 on November 3 and more than 300,000 on January 20, 2021.The obvious tragedy here is that the number of deaths is accelerating. Back in March and April, the federal government could have taken drastic steps to mobilize and at the same time bring Americans together to fight a common enemy, something we have always done well. We all self-quarantined assuming our governmental leaders would do what they were supposed to do. They didnt.
There will be gubernatorial recall efforts in such states as Florida, Texas and Arizona.Highly likely given the above forecast.
The rest of August and all of September will have widespread coverage of the inability of colleges and schools to open.It is hard to think of a tougher job right now than that of being either a college president or a school superintendent. The rest of August and all of September will have widespread coverage of the inability of colleges and schools to open. That will closely be followed by rapid rises in COVID-19 cases at all levels and the resulting shutdowns and even lawsuits around openings. Politicians demanding that schools open are not really thinking of the potential for children to die and/or infect families and teachers. This is a social, economic and political crisis that is about to unfold across the country.
Office and commercial real estate markets will crash now through 2021 and possibly longer. Manufacturing real estate might well be strong.The office collapse is already starting. Numerous companies have already stated that all, the majority, or significant percentages of employees will be working from homepermanently. In the several conversations I have had with companies that have largely white-collar work forces, I have yet to find one that has more than 10% of employees wanting to come back to office work. This will lead to lease negotiations, cancellations, and non-renewals. The demand for office space has collapsed and this market therefore will have far more supply than demand. Look for dark office buildings in urban centers. There will be no leveling off until the majority of Americans have been vaccinated. However, the new habits, productivity and huge cost savings of enterprise working from home will have been made by then.
Commercial and retail real estate will be the same. Along with other forecasters I have stated that more than 25-30% of all restaurants, bars and coffee shops open in January of this year will close in the U.S. In addition, there will be almost the same percentages of non-restaurant retail stores closing. This means that it will be hard to walk down any shopping street or visit any mall in the US and not see lots of vacant retail spaces. A real tragedy to small business owners, but large chains will close and declare bankruptcy as well.
Industrial real estate will be strong. This is because of the embarrassing realization by the U.S. that so much of our critical manufacturing products such as PPE for medical workers and citizens is made overseas, largely in China. Now that we are in an escalating economic war with China, it is necessary to bring manufacturing back.
Residential real estate will be a mixed bag. By the end of summer, all the pent-up demand from lock-down will have run its course and nationally this market will be flat. Low interest rates aside, too much loss of wealth, unemployment and exhausted savings will be a big drag. The default on mortgages will increase and the evictions of renters will increase.Right now, there is a flight from urban areas due to perceptions of higher probability of infection due to density. I dont think this will last past 2021, but I dont really know.
I conclude by saying that our local, national and global economies are all depressed and unfortunately some parts of them may never fully come back to the way they were last year. Hug the ones you love and readjust what is important in your lives.
Sarasota resident David Houle is a globally recognized futurist. He has given speeches on six continents, written seven books and is futurist in residence at the Ringling College of Art + Design. His website is davidhoule.com. Email him at email@example.com.
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