Economist Makes Predictions Plus a Few Warnings

Dr. Esmael Adibi, economist with Chapman University, was so popular when he addressed attendees of the American Architectural Manufacturers Association (AAMA) a few years ago that he was invited back this week to the association’s annual meeting held in Tucson, Ariz. He even showed attendees how that forecast from a few years ago turned out.

In 2010 he predicted GDP growth to be 2.4 percent and that’s exactly how it ended up, a fact he was proud to share. In 2011, he predicted 3.3. but it was only 1.8. In 2012 he said 2.3 and he came in at an impressive 2.2.

He also stood up for that 2011 abnormality citing the debt crisis in Europe, unrest in the Middle East and rising oil prices and the Japanese earthquake as unforeseen reasons for that drop. In addition, 32 states had budget deficits at that time.

Fast-forward to 2013 and we still have European debt, combined with U.S. debt to deal with, along with continued unrest in the Middle East.

The good news for 2013 is that GDP looks to come in at 2.4 percent, auto sales are up (a good sign for the economy) and household net worth has increased. On the flip side, unemployment is still down 2.5 percent, which is a cause for concern, along with rising social security costs.  And an unprecedented amount of government spending is a large area of concern.

Back to that good news, housing starts for 2013 look to end up at 968,000, a 24-percent increase from 2012.

“You guys are definitely going to do better this year due to housing,” he said. “But employment is still a problem and we won’t make up all those losses from the past several years.”

He gives some advice to companies, “If you need to borrow, borrow to your neck now.”

So we know his good and bad news predictions, but what are a few areas that make him nervous? He says the housing recovery is a little worrisome as he has seen some investors getting back into the market and investors come and go. What we need are stable homebuyers, he said, which will also help in boosting employment numbers.

“When children are living with their parents it’s not as essential for them to get back into the job market,” he warned.

Another area of concern is possible overbuilding but it’s not the most worrisome. When an attendee asked what is the biggest threat to the economy his answer came easy, “Governments. No kidding.”

The meeting wrapped up today in Tucson.

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