Some cities and states in America have been doing very well in the four years since the end of the Great Recession. But for many other cities and states, it seems the recovery is still waiting to happen.
If you live in a region that has a big presence in the oil and gas industry, the recovery has been robust; job growth is happening; houses are selling, and commercial real estate is filling up. Construction cranes are again dotting the horizon.
If you live in other regions of the country that do not have an oil and gas presence, things may be a lot different. Here are the “headwinds” that are facing those areas of America (including parts of Texas).
Challenge 1. Federal government spending and hiring is not growing. In some cases, it’s declining. For cities that have a large federal government employment base, job growth is just not happening.
Challenge 2. In the past five years, state and local government spending has not grown either. This means that government hiring has been constrained. In some cases, layoffs in state and local government have mitigated job growth in the private sector. Tight government budgets also have negative impacts on local businesses that provide goods and services to government entities.
Challenge 3: Since 2007, there has been a dramatic decline in the construction of new homes. While building permit activity is rebounding, it is still much less than 2006 and 2007 levels. Home building activity has a strong multiplier effect in the job market.
Challenge 4. Every city in America is impacted by the uncertainty of the cost of health care under the new health care law. Business owners have been reticent to hire workers because they don’t know how the new law will impact their costs of doing business.
Challenge 5. Federal Reserve monetary policy has handsomely rewarded people who own stocks and houses. Setting interest rates at zero has caused stocks to surge to record highs. House prices are rising again. If many people in your community own stocks and houses, then your local economy is doing well. If a lot of people in your community don’t own stocks and houses, then you aren’t doing so well.
Challenge 6. Some communities in America are retirement destinations. When Americans get older, they seem to have a preference for sunshine, warm weather and a low cost of living. But the flow of retirees moving to these areas dropped substantially after the stock market crash in 2008. Many people have postponed retirement because of this event. Another reason that some may have postponed moving to sunnier climes is that the value of their homes may have dropped substantially in the past five years and is just now starting to recover.
Here is the good news for the many cities in America still waiting for the recovery.
In many parts of the country, state and local government revenue is increasing. Property taxes are up; sales tax revenue and income tax revenues are increasing as well. This means that states and cities are under less pressure to lay off workers and may actually start adding workers in 2014.
For cities that are retirement destinations, the good news is that the stock market has fully recovered from the 2008 crash. Many people who want to play golf rather than shovel snow may feel like making the move. As house prices move higher, retirees will have more equity to use to purchase their new retirement dream.
New home construction is finally starting to rebound. Building permits and new home sales are increasing, and home builder optimism is strong. More home building will mean more employment.
Unfortunately, there are continuing headwinds to employment growth in 2014. Congress and the president still cannot come up with any meaningful plans to encourage the private sector to expand. The hopes that were created by Simpson/Bowles’ proposed reforms are long gone. Tax reform is not on the table. The uncertainty of the cost of health care has been extended for another two years. Small employers are still going to be wary of hiring additional workers this year and next.
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