Although the economy — especially the job market — has been improving, it’s not been gaining fast enough to satisfy most people. Have economists figured out why the sluggish growth is occurring? N.C. State University’s Mike Walden weighs in.
“One of the big reasons — and you hear this as a reason for a lot of our economic concerns — is the housing market. Normally, if you look at a normal recession, people do reduce their buying of homes simply because during a normal recession, unemployment goes up, income goes down. People are a little unsure about their future. But then after the recession, housing usually comes back like gangbusters. There’s all what economists call ‘pent-up demand’ for new homes.
“And so housing is one of those areas — residential housing — that leads us out of recessions and provides some of the steam for good gains and things like incomes and jobs. We are not seeing that this time. We have had, as you’ve indicated, a very modest economic recovery, and housing is not contributing to it at all. In fact, it’s still actually a drag on the economy. And I think that’s because this recession was really stimulated by a crash in the housing market. Most people know that sales have gone down. Construction has gone down. And very importantly, prices have gone down. And we’ve not yet recovered from that.
“We still have an overhang really of all the buildup in housing that we’ve had about five or six years ago. So, this time really is different.
“And one of the reasons for the sluggish economy is the slowness in the housing market. And really, we have to get housing well before the economy gets well.”