January '20

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20 • RV PRO • January 2020 rv-pro.com Looking ahead to 2020, economists expect recession fears to have a damp- ening effect on the labor market. "Unemployment is expected to edge slightly higher, to 3.9 percent, by the end of 2020, due largely to a deceleration of job growth," Koropeckyj says. "We expect job growth to steadily decelerate and cease altogether in the second half of the year." For the time being at least, happy shoppers are good news for retailing, an important driver of the national economy. Moody's expects core retail sales to increase by 4 percent when 2019 numbers are finally tallied, up from 3.4 percent of the previous year. (Core retail sales exclude the volatile auto and gasoline segments.) As for 2020, Moody's expects retail sales to increase by only 2.3 percent. "A deceleration of job growth means fewer new people will enter the ranks of active shoppers," says Scott Hoyt, senior director of consumer economics for Moody's Analytics. "And that will exert some downward pressure on retail sales growth that may more than offset the positive effect of the higher wages (and thus the greater disposable income) char- acteristic of a tightening labor market." Housing Rebound Confident consumers are maintaining a steady drumbeat of interest in housing, another critical driver of the economy. Moody's expects 2020 to be the first year of a strong residential construction recovery led by single-family homes. Housing starts are projected to grow 7 percent in 2020. This comes off a rocky 2019, in which starts were expected to drop by 0.7 percent when the year's num- bers are finally tallied. Why the dismal 2019 experience? "There have been a number of obsta- cles to stronger residential construction," says Koropeckyj. "The first is a shortage of specialized workers. The second is the prevalence of strict residential zoning reg- ulations, especially in dense urban areas. The third is a shortage of residential- ly-zoned land within commuting distance of business areas in some metro areas in the Mountain West and Inland South." Older Millennials now reaching prime home-buying age are expected to drive the 2020 housing recovery. They will be entering the market at a time when the housing inventory-to-sales ratio is at record lows. The fact that zoning is generally less restrictive for single-family as opposed to multifamily construction translates into a much stronger sin- gle-family construction forecast. Relatively low mortgage rates also will help, although these are expected to start rising in 2021. The housing rebound will be tempered to some degree by declining affordability, according to Moody's. The median price for existing sin- gle-family homes is expected to rise 4.1 percent in 2019 and 2.9 percent in 2020, compared with 4.7 percent growth in 2018. The deceleration of price growth in 2020 is due largely to the increase in housing starts bringing more units to the marketplace, as well as to price resistance from buyers. "Even though home prices will decelerate, they will still increase and ownership will become even more out of reach for many households than it is today," Koropeckyj says. Banks, for their part, seem to be filling their critical role in a robust housing market. "Mortgage lending has been con- tinuing unabated and largely concen- trated among borrowers with high credit scores," Koropeckyj says. "We expect this pattern to hold in the future." Interest rates are expected to con- S PEC I A L S EC T I O N O U T LO O K 2 02 0 "The workforce will be put under continuing pressure in the future. Over the next 15 years – for the first time in the U.S. – there will be more people of retirement age than under the age of 18. And a contraction in immigra- tion is also putting pressure on the workforce. Companies will have to look for other ways to grow without hiring workers who might not be available." Tom Palisin, executive director The Manufacturers' Association "We look for the economy to grow below its potential in 2020. Corporate profit mar- gins have been compressing noticeably as growth in labor costs has outpaced revenue growth. Shrinking margins are often associated with late-cycle expansions and often cause businesses to be more cautious in hiring and investment." Sophia Koropeckyj, managing director Moody's Analytics SOPHIA KOROPECKYJ PHOTO COURTESY OF MOODY'S ANALYTICS TOM PALISIN PHOTO COURTESY OF THE MANUFACTURERS' ASSOCIATION

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