By Tim Hunt
Economist says U.S. economy will fully recover this monthUploaded: Jun 24, 2021
Christopher Thornberg presented his annual economic update to the East Bay Economic Development Alliance Wednesday and stressed how different the pandemic-induced recession is from the Great Recession.
He said that he predicted a V-shaped recovery last May in his annual update and that’s occurred with the exception that it was slowed by the second surge of the virus last winter. The bottom line is that the recession ended in April and the economy will be back to pre-pandemic levels by the end of the current quarter (six quarters compared with nine years for the Great Recession). That testified to the steady growth the United States has been seeing under the President Trump policies—the economy did not have the underlying issues that bit us in 2007-2009.
He also cited history shows that natural disasters do not have long term consequences for the economy as opposed to the underlying economic conditions of the mid-2000s.
Thornberg contrasted the politicians’ under-reaction in 2007-2008 to the huge over-reaction that is still ongoing despite the health of the economy. He’s quite concerned that it’s being fueled by borrowed money and results in an intergenerational mugging of our children and grandchildren by leaving them with huge bills to pay.
He described the current situation, with 9.3 million job openings across the country, as ideal for workers who have leverage because employers simply cannot find qualified help. Thornberg said this was an ideal time for governments to invest in job training programs to help workers learn the skills necessary for careers as opposed to low-wage jobs. He also pointed out that the shortage of workers involves demographics with older workers retiring during the pandemic.
The price of housing is not a bubble like we saw in the 2000s—it’s reflects the health of the economy and the lack of supply in California, he said. During the major job expansion, Bay Area communities added just one house for every six jobs.
Looking ahead he criticized Fed Chief Jerome Powell for his lack of concern about inflation. Thornberg agrees that some of the price increases may be transitory, driven by supply chain issues and demand (lumber prices peaked and have fallen significantly), but the amount of money in the system is of deep concern looking out a few years. He described the Fed’s lack of concern as “irresponsible.” He described it as the highest risk of inflation that he’s seen in his career. Very low interest rates have made borrowing cheap for the government, but if there’s a need to control inflation that means raising interest rates. Those of us who have are enjoying mortgage rates in the 3-4% range can also remember rates of 18% in the early 1980s.
He’s also bullish on the return of the classic downtown areas such as San Francisco and Oakland. He expects companies to reduce their footprint as employees spend fewer days in the office, but he anticipates that space will be leased by other companies who see the advantages of being downtown.
Thornberg said suburbs such as the Tri-Valley should plan to return to a more traditional suburb (think lots of residential). That stands in contrast to the job centers that we have along the I-680 corridor here.