GRAND RAPIDS, Mich. (WOOD) — Growth in employment and production in the latest report from Grand Valley State University’s business college indicates we may be headed toward a mild recession.
Brian Long, director of supply chain management research at the GVSU Seidman College of Business, explained that a mild recession means not everyone will experience it the same way. He said while the automotive industry may not be seriously affected, other sectors like office furniture or local aerospace contractors will feel the pinch.
“Now when this happens, of course, it impacts all the rest of the community because people become laid off, they in turn don’t spend as much and their mental attitude is that of trying the best they can to preserve the money that they have because they don’t know when they may get laid off,” Long said.
In order to avoid a recession, Long said the Federal Reserve must control inflation.
“So what I’m hoping from the Fed is that when they meet December 14th — that’s just a few days from now — we will hear another announcement of a substantial increase in the interest rates,” Long said.
He said a slowdown in the housing market has also been expected for a while and believes a housing bubble burst will help bring down inflation. He believes that has already happened.
“I think the housing bubble has already broken. … What this implies is that we overbuilt on housing, as we always do in some instances, and people’s expectations rose that once again, they could get a higher and higher price for their homes,” he said.
Long said we may see housing costs decrease as building backlogs of materials and personnel clear up.
“I’m hoping that we will come to a new equilibrium. Obviously, building prices have been rising at a very rapidly rate largely because of the lack of materials, the price of materials and the lack of personnel to build the houses,” Long said. “I’m assuming in the very near future, they’re going to get a call from those contractors who are going to say, ‘Oh gosh, the backlog has cleared and we can begin building your house very soon.'”
As far as employment, the report indicates improvement since October.
“For the short term, employment is going to continue to improve because again, we have this backlog that has been building up,” Long said. “Many of the participants in our survey have been complaining for the last two years that they can’t hire enough people or they can’t hire enough skilled people. Well, as this downturn, as we are calling it, begins to roll out, I think what’s probably going to happen is the backlog will probably clear itself over roughly the next six to nine months.”
To view the full December report from Seidman College of Business, visit the GVSU website.