This morning, Dr. Tony Spiva (UT’s economics professor emeritus) spoke to a joint breakfast of IREM and CCIM abou the economy, its recovery and some what to look for over the next few years.

Was it uplifting?  No!  Was it better than last year’s outlook? Yes.

About this time last year Dr. Spiva gave the same group a glimpse of what was to come.  I don’t remember all the details of the meeting but I do remember him stating that we would start to see the light at the end of the tunnel around the 4th of July…2010!  At that point most of the developers in the room were looking for a way to open Club LeConte’s windows to take the 28 story plunge.

As we all know, 2009 was a disaster.  Based on phone calls, inquiries, incoming e-mails and prospects to my office over the past two months (which of course has no actually scientific viability) I’d say we have turned the corner.  Dr. Spiva agrees and expects the Sixth Federal Reserve District to soon determine the “trough” of the recession was sometime in November.

Dr. Spiva spent a lot of time talking about the past, comparing this recession to past recessions.  The U.S. has had 11 recessions since World War II, none of them as bad as this one.  Most past events have been tempered because other portions of the world, Europe, Asia, etc…have remained strong and helped carry us through.  That is not the case this time.

Many comparisons were made regarding employment.  Graphs Dr. Spiva provided (I will send them to you if you like, jcazana@ciprop.com) showed comparisons to the seven downturns since 1970.  A trend is developing showing that in each recession the percentage change in unemployment goes deeper and recovery takes longer for each period that comes up.   Example, 1974-76: Employment fell 2.75% and took about 20 months to recover; 1981-83: Employment fell 3% and took about 27 months to recover.  Since 2007 employment has fallen 5.1% and is not on the way up, and we are at 22 months.  His prediction is for jobs to not fully recover until 2015, that would be 80+ months.

Another concern is the stimulus bill.  Dr. Spiva’s opinion is that the $800 billion wasn’t nearly enough.  $1.3 trillion would have been more helpful but the Republican’s in congress would not allow President Obama to go that high.

He expects congress to put together an additional stimulus package later this year but expects it to be as big a disaster as the current package (that is his comment on the incompetency of congress, not what effects the stimulus could have).

Pressure is also on the Federal Reserve to make sure they handle the recovery carefully.  Increasing interest rates to quickly, or too soon, could cause inflation; not doing it quickly enough could ruin the recovery.  Dr. Spiva says we are in a very fragile state of recovery now things could go either way.

How does this effect commercial real estate?  Well until banks get comfortable lending money real estate can’t expand. 

It was an interesting talk.  Dr. Spiva always provides strong insight it to what is going on.  My apologies to Dr. Spiva if I flipped some of his comments or made factually incorrect statements.  I will be happy to retract them if you point them out.

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