New Orleans Home  & Garden Show

March 10-12, 2017

www.NewOrleansHomeShows.com

View Golf Flyer HERE

Now is the time to sign up for the Parade! Whether you're a builder or an advertiser, take advantage of one of HBA's biggest media opportunities!

Builders  Builder Entry Packet

Advertisers Guidebook Ad Rates  and Sponsorship Information

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at [email protected]. His daily 70 word economics and policy blog can be seen at www.econ70.com.

The US government can currently borrow at exceptionally low interest rates. After considering inflation, the rates are sometimes zero or even negative, meaning that the government is effectively getting paid to borrow. Under these circumstances and with GDP growth quite anemic, isn't the case for increased borrowing overwhelming? After all, the benefit of public investment in roads and bridges must surely be greater than zero, right? Maybe not! 

If the economy were operating substantially below its potential -- if the unemployment rate were high -- the case for borrowing more and running larger budget deficits would be strong. The added stimulus from the increase in government spending would boost household incomes, which would increase aggregate demand and bring the economy closer to its full potential. That is why governments tend to run large deficits during recessions and why there are many counter cyclical programs like food stamps that ramp up as the economy weakens.

However, at present, the US economy is operating close to full capacity. The unemployment rate is almost the best in ten years, wages are rising faster than they have in years, and inflation, while still low, is clearly picking up. That said, GDP growth remains anemic at just 2%. Wouldn't more stimulus boost GDP? Probably not. At this point in the cycle, more stimulus would not create much more output. Rather, it would primarily create wage inflation, as too many firms looking to grow would chase too few workers, and, in the process, drive up wage growth and inflation, since firms would attempt to pass their higher costs of production to buyers. 

To avoid this destructive inflationary spiral, the Fed would raise interest rates. The rise in rates would depress private investment, which would allow for non-inflationary increased public investment. However, it should now be obvious that the cost of the increased public investment is the reduction in private sector investment. Thus, the opportunity cost of the public investment is not the very low interest rate paid on government bonds; it is, rather, the loss of productivity of the private investment that would never be built, such as a new factory or warehouse. And the productivity of that private investment is certainly higher than the interest rate on government bonds! 

The only case, at present, for deliberately overheating the US economy is if you believe more stimulus can undo some of the long run damage sustained by the economy during the Great Recession. The idea is that by artificially and temporarily pushing the unemployment rate way down, some discouraged workers might be enticed back into the labor force. Similarly, as firms find it harder to hire enough new workers, firms might offer existing workers more hours or convert part-time positions into permanent ones. Firms might even boost labor productivity by investing in workforce training or new equipment. 

While weak GDP growth is a problem, simply running large deficits to stimulate the economy because interest rates are low is unwise given how low the unemployment rate already is. That said, there is a strong argument to be made for a short-term increase in the deficit designed to bring previously discouraged workers who left during the Great Recession and have yet to return. Lastly, rather than a simple tax cut, if deficit spending is carefully targeted to public investment that boosts the productive capacity of the economy, it would bring long lasting benefits to the economy that we would enjoy for decades -- not just today.

We are excited to welcome Sandy Hienz to the HBA team this month! Sandy will be handling outside sales for the HBA, helping to make sure all HBA members have the opportunity to market to their full potential within the HBA. 

Sandy is bringing a wealth of knowledge from her experience with companies such as Cumulus Media, Cox Media, The Weather Channel, and HBO, which will surely enhance the marketing program. 

Be sure to say hi to Sandy at the next event or reach out to her today! 504.252.3192 or [email protected]. 

L to R: Roy Olsen, Scott Morse, Mike LeCorgne, John Courson (HBI CEO), Randy Strauss (HBI Chairman 2017), Jon Luther, Floyd Simeon

We are very proud that our own CEO, Jon Luther, serves on the national board of trustees of the Home Builders Institute(HBI). HBI's providing amazing construction trades educational and career opportunities to at-risk youth, returning military veterans, and nonviolent offenders. Building Careers-Changing Lives.

Thanks to everyone who joined us for our Owner Occupied Rehabilitation info session. We hope everyone is able to bid and win as many jobs as possible. If you'd like more information on the Owner Occupied Rehabilitation Program, or Jefferson Joining Forces, please contact Philip Thomas.

The theme for this month's secret word is Mardi Gras. The secret word for February 2017 is Doubloon. Call Lauren at the HBA office at (504) 837-2700 and tell her this word. The first person to call with the correct word will win a $20 gift card to Martin Wine Cellar. 

Congratulations to Marilyn Cox of Home Bank for winning last month. If you've already won, we ask that you please give others a chance. Thanks for reading!  

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 

Thanks to Devon Sweeney, with Sweeney Restorations, and John Heald, with One Man and a Tool Box, for volunteering their time in January to help elderly and/or disabled home owners make it through the repair process. For more information on how you can get involved with Jefferson Joining Forces, contact Philip Thomas.

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at [email protected]. His daily 70 word economics and policy blog can be seen at www.econ70.com.

Entering 2017, the domestic economic landscape is solid, and while there is an increased likelihood of volatility with President Trump in the White House, the risks to the forecast are slightly to the upside.  This is because the proposed combination of personal and corporate tax cuts, increases in infrastructure and defense spending, reduced regulatory burdens and the likely repatriation of hundreds of billions in overseas corporate cash are all expected to boost economic activity and inflation in 2017. 

However, there are also definite economic headwinds.  It is highly likely that Congress will reduce the size of any tax cuts and spending increases sought by President Trump, blunting their impact.  In addition, legislation takes time to pass and, after passage, there will be lengthy lags before the money begins to impact the economy.  Also, the already rising dollar will hurt manufacturing activity by raising the cost of exports.  Lastly, any attempt to slap tariffs on imports is fraught with the risk of precipitating a trade war, which has obvious negative growth implications.

With all this uncertainty in mind, I expect full-year 2017 GDP to come in at 2.3%, slightly higher than the 1.9% growth experienced last year and the 2% average rate of growth since the end of the Great Recession.  Headline inflation looks to pick up from roughly 1.5% to near 2% in 2017, while core inflation (which excludes food and energy) will edge up, but only slightly.  Because of the slow rise in inflation, the Federal Reserve will have the luxury of time to raise the federal funds rate from where they are now, at 0.625% to, at most, 1.375% by year end, with a rate increase coming roughly every three months and starting no earlier than June. 

Turning our attention to the labor market, I expect net new monthly job growth to average 160,000/month, which, while down, from 188,000/month in 2016, is excellent given that we are late in the business cycle and there are relatively few potential workers still on the sidelines.  Thus, the unemployment rate will probably fall from 4.6% today to 4.3% or possibly 4.2% by year end.  As the labor market tightens, nominal wage growth should increase further in 2017 with average annual wage increases rising from 2.4% to as much as 3%: a healthy rise.

Because of better GDP growth and falling unemployment, 10-year Treasuries will end 2017 at 2.70%, and the rate on 30-year mortgages will be 4.6% as the yield curve rises and steepens due to faster rising long-term rates.  But, continued easing of credit conditions and rising consumer spending due to continued good employment and wage growth will keep the economy and housing market on track. 

Housing starts should increase by about 7.5%, to 1.25 million.  Single-family starts will likely total 850,000, up from 760,000, while multifamily starts should hit 400,000, up from 390,000.  New and existing home sales should collectively rise by about 3% and end the year at 6.15 million, with mortgage purchase volume advancing by $100 billion and refinance activity falling by about $400 billion due to the rise in mortgage rates.  Housing inventories will, regrettably, remain unchanged, and combined with limited new home building, home prices will rise by 5%.  Lastly, I put the chances of a recession in 2017 at a low 15% to 20%.