During the recent MBI Modular Construction Summit in Washington D.C., manufacturers, dealers and service providers for the modular building industry had the pleasure of listening to Anirban Basu of the Sage Policy Group, Inc. Mr. Basu is also the chief economist for the Association of Building Contractors; therefore, he is acutely aware of the effects this recession has had upon the construction industry.
With the 2008 economic meltdown, the global aspect of our economy has become painfully obvious; NYSE down 33.8%, NASDAQ down 39.6%, London down 31.3%, Frankfort down 40.2% and Tokyo down 42.1%. Since that time, some modest growth has happened globally; 2010 recorded 5.0%, 2011 is on track for 4.4% and 2012 is forecast at 4.5%. The United Stated throughout this period has had, and is forecast to hover around 2.8% growth. This is contrasted by “Chindia” (China and India) whose growth during this same period is projected at 10.35%. China’s economy should surpass the U.S. within this decade and be twice that of the U.S. by 2030. The largest single migration on the planet is not Latinos moving to the U.S., it is rural Chinese moving to urban China, creating a “Chicago Sized” city every year in that country. Imagine the demands this must place upon infrastructure and the construction programs required to respond.
Our current soft period in the recovery is yet another example of global events and their effect upon our economy. At the start of 2011, the U.S. was poised to enjoy a “less bad” economic climate…..then things started to happen; even more political unrest in the Middle East, namely Egypt, Syria and Libya, raised oil prices significantly. This effectively put the brakes on consumer spending and raised the cost of all goods produced and distributed. Then in March the devastating earthquake and tsunami that hit Japan threw yet more havoc at world markets. These events have effectively postponed a widespread recovery in the U.S. until Q-3 or more likely Q-4 of this year.
Aside from our growing debt that we’ll address in a moment, the biggest issue still plaguing the U.S. economy is unemployment. Q-1, 2011 U.S. metropolitan unemployment rankings had the metro D.C area at 5.4% (the trappings of big government), DFW at 7.7%, Houston at 8.0% and the Riverside, CA area in last place at 13.7% unemployment. The national Q-1 average was 8.5%. Comparing December 2007 to May 2011, unemployment gains and loses should come as no surprise to anyone in the modular building industry; Education and Healthcare has grown 7.5%, Mining and Logging (natural resources) has grown 4.6%. This is contrasted by a loss in Manufacturing of 14.9% and a loss in Construction jobs of 26.2%. Non-residential construction has fallen 27.1% and is not expected to rebound anytime soon as public dollars are slowing and private dollars are not quite ready to take up the slack. Residential construction has even a bleaker outlook due to a paradigm shift in homeowner expectations. For the first time since World War II more people are aspiring to rent than to buy. This does not bode well for new housing starts.
What does all this mean?? Bail-outs and stimulus dollars have not stimulated anything. The U.S. has thrown money that we do not have at the problem for the last several years to no avail. Our nation’s debt is approaching the 14.294 trillion dollar ceiling established just last May and is projected to surpass the ceiling on August 2. Doing so would mean a default on debts by the government which is a place we have never been as a nation with potentially devastating repercussions. Republicans are only willing to consider raising the debt ceiling to the extent Democrats are willing to accept budget cuts (all the while not increasing taxes). Both sides’ posturing on the debate amounts to playing chicken while deep into uncharted territory. While each side has a very different view on a proper course of action, both sides are going to have to roll up their sleeves, compromise and resolve the issue is a realistic timetable. This crisis is too big to fix overnight (or in a decade for that matter). Only through a bi-partisan effort will we have any hope at addressing our debt. As we approach a general election next year, this will be the biggest single campaign issue. Use your vote wisely. Study the issue and determine your candidate’s position. Remember, you have the ability to “fire ’em all” and start over if the partisanship continues.
Linc Moss is President of Ramtech Building Systems, Inc. He has been in the modular construction industry for 36 years, has twice been President of the Modular Building Institute, and has represented the commercial modular building industry before Congress.