The Battle Hymn of the Economists
An economist, a wit once said, is someone who likes numbers but lacked the charisma to be an accountant. This canard was challenged last month, when two exceptionally charismatic chief economists, David Wyss of Standard & Poor's and Kermit Baker of the American Institute of Architects, took the podium in separate appearances at the Construction Specifications Institute show in Chicago, just as the U.S. was embarking on the war with Iraq.
"These are the most uncertain times I can remember," said the 58-year-old Wyss. "It wasn't much of a recession, but it wasn't much of a recovery, either."
Look for the deficit to hit $400 billion this year, he told his CSI audience, and watch out for a possible W-shaped economy, with another downturn following the current milquetoast recovery.
Consumers have done their part to prop up the economy (especially the housing sector), said Wyss, who served as a senior economist with the Federal Reserve Board and the President's Council of Economic Advisers. But business just isn't spending enough on new equipment and construction. With manufacturing at 70% of capacity and unemployment at record levels (hence the glut in office space), why should it?
As if that wasn't bad enough, the picture beyond our shores is worse, with only Asia-outside-Japan showing any vigor — unless SARS and North Korea explode.
The stock market? It will rise roughly with the GDP, about 5% a year, Wyss predicted, but "it'll take 15 years to get back to the S&P highs" of the dot-com era.
Wyss's parting words: "The economy is recovering, but it's recovering slowly. We're looking at moderate growth, and the cup is still at least half full."
The next morning, Baker, who in addition to his AIA post holds a senior research fellowship at Harvard's Joint Center for Housing Studies, addressed a capacity audience at the Reed Construction Data breakfast. He reported that the AIA's most recent survey of the 300 largest architectural firms in the U.S. showed billings starting to pick up last fall, and inquiries to architectural firms — a leading indicator of construction activity — were looking even better.
While acknowledging that office, industrial, and retail construction were still in the doldrums, he pointed to the stable institutional sector and the booming rehabilitation market, which accounts for nearly 40% of nonresidential construction activity.
In sum, said Baker, nonresidential construction should experience less of a decline in the second half of this year than had been the case in 2002. That's as close as any forecaster will come to anything approximating "Happy days are here again!"
Baker's parting words: "We can expect a full recovery in the nonresidential sector in 2004."
Were these distinguished scholars talking about the same planet? Why was Wyss's glass merely half full, while Baker's seemed near to brimming with hope for 2004?
Perhaps it is true, as another wit once said, that if you laid all the economists in the world end to end, they still wouldn't agree on anything.
Or, as J. Kenneth Galbraith, himself among the brethren, once put it, "If you laid all the economists in the world end to end ... that would be a good thing."