HOBART │ Manufacturing returning to the U.S., a housing and construction comeback and “getting junior out of the house” are some of the reasons the country is on an economic journey to normal, according to an industry expert.
On Wednesday at Avalon Manor, the Northwest Indiana Forum and Fifth Third Bank welcomed Jeff Korzenik, chief investment strategist at Fifth Third Bank, for an economic outlook and review.
Korzenik, a 27-year industry veteran and a frequent guest on CNBC’s “Closing Bell” program, said the economic downturn of 2008-09 might not have been “your grandfather’s recession, but it was your great- great-grandfather’s recession”
“The kind of financial disaster that we weathered in 2008 and 2009 used to occur in the United States every 10 or 12 years,” he said “But it primarily occurred in the 19th century and parts of the 20th century. Economists called it a financial panic. What was abnormal in ’08 and ’09 was that we had a 19th century recession.”
That said, Korzenik thinks we are turning a corner.
“There have been some structural changes in the U.S. workforce,” he said.
If you lose your job in a recession it takes you longer to get back to work, Korzenik said. Usually it takes 15 to 20 weeks on average for people to get back in the workforce but in this recession, people stayed out of work for 40 weeks or more.
“We’re starting now to get some resolution from this because we’re through the pipeline of people exhausting their unemployment benefits and making tough choices to return into the workforce,” Korzenik said. “This is the essence of the journey to normal.”
Housing and construction market is also on a comeback and the acceleration is continuing, Korzenik said.
Children of baby boomers are moving out of their parent’s homes. It was delayed during 2008-09 downturn. Korzenik called it “getting junior out of the basement.”
Some of those “juniors” may only be renting but others are buying homes. Korzenik also said there was not a lot of hiring of young people during the recession, but that has changed. Their unemployment rate was above the national average but now it’s below.
“This group has seen enormous gains,” he said.
Korzenik said another driver of economic growth is the reshoring of manufacturing in the United States. The days of sending jobs overseas is changing and makers of heavier items are moving back to the U.S. Korzenik said Whirlpool has opened its first manufacturing plant in the U.S. in 30 years.
“It’s important for the creation of new jobs,” he said. “Manufacturing jobs may not pay what they paid at their peak, but they still pay more than service sector jobs.”
Korzenik said manufacturing jobs have what Congress calls "a high multiplier effect," which means they tend to create other jobs in the economy.
Additionally, there has been a profound energy revolution to extent that the U.S. has overtaken Russia as the largest energy producer of the world.
“Ten years ago this was unthinkable,” Korzenik said. “It’s one of the drivers of manufacturing because energy in the United States is cheaper.
Korzenik also talked about the movement to natural gas in vehicles – something that’s becoming widespread with trucking fleets across the country.
Despite the apparent journey to normal, Korzenik was reminded of the proverb “a man plans and God laughs” – which means things can go wrong. Those things include inflation risks, currency debasement and inflation.