Anirban Basu thinks West Michigan’s real estate and construction industry has a pretty solid outlook for 2017. The chief economist for the Washington, D.C.-based Associated Builders & Contractors (ABC) views the region as having a strong job market and plentiful access to capital. Basu — who is also president and CEO of Baltimore-based economic consulting firm Sage Policy Group Inc. — spoke with MiBiz following his annual presentation in early December to the Western Michigan chapter of ABC.
You’ve mentioned that a Trump administration will bring a fair amount of economic stability. Can you expand on that?
I think Trump has suggested that he wants to spend more money on infrastructure. But perhaps more importantly, for the 2017 economic outlook, (he wants to cut) taxes. It’s already a decent economy that he inherits. Many construction firms are busy, especially in West Michigan. And if anything, the Trump administration will add fuel to that fire. So I think the 2017 outlook has improved dramatically.
What downsides can you see?
I would expect that the next recession — when it comes — will wind up being much deeper than it would have been (under Hillary Clinton). I’ve been expecting a mild recession in the future, maybe 2018 or 2019. I now believe that whenever the next recession occurs, it will be much deeper than it would have been.
How will development and construction growth in downtown areas and urban neighborhoods affect the surrounding suburbs?
Once people have kids and start planning school districts — while you can make cities like Baltimore and Detroit shiny by adding streetscapes and maybe some light rail, … you can’t fix schools right away. It might suggest that in some of these cities, we’ll have overbuilt apartment markets because a lot of them are built to house millennials and now they move to the suburbs.
The Grand Rapids area has about 2,000 apartments expected to come online over the next year or so. Does that number give you any cause for concern?
It should be some concern — I don’t think grave concern. As long as the Grand Rapids economy can continue to produce significant numbers of jobs — and it has over the last 12 months — then the apartments will be occupied. Everything works out if the apartments are occupied and (owners) don’t have to make too many concessions to try to fill those apartments.
Does anything indicate that the market might be overbuilt?
I don’t think we’re necessarily to an overbuilt state. I think, ultimately, a place like Grand Rapids — and in many places around the country — we will wind up with too many apartments. But I’m not sure we’re there yet. The key is the job market.
What’s your overall outlook for the job market heading into the next year?
I think there’s a fair amount of job creation, but I think what will be more profound will be the increases in wages and compensation. There’s just not that many people left to hire. The nation’s unemployment rate is about 4.6 percent. People have a lot of skepticism regarding the official unemployment rate — I understand that — but the fact of the matter is if you ask almost any business person, they’ll tell you it’s difficult to find good workers right now. It’s going to get more difficult over the next year. That, of course, pushes wages higher.
What’s keeping you up at night as you look ahead to next year?
I think the same thing that’s kept me up at night for years, which is the national debt. Everyone loves a good tax cut, but we already have nearly a $20 trillion national debt and we’re facing insolvency in Medicare and Social Security within two decades. So it seems that some of the policies being put forth by the new administration would tend to accelerate some of the national debt and, ultimately, we have to pay the piper. I don’t think it’s next year or 2018, but at some point, there’s going to be a lot of dislocation when that crisis comes. I think it will come in the next decade.