By Kevin Hassett, American Enterprise Institute
ARDA Guest Blogger
January 29, 2014
The last quarter of 2013 was filled with all kinds of economic uncertainty—budget gridlock, labor market challenges, international disruptions, and the Washington shutdown. But many “dashboard indicators” give me optimism about our economic future.
There are four metrics that I watch to track a return of economic growth:
1. The deficit has been reduced enough that uncertainty is no longer a drag.
2. American wealth has gone back up to pre-crisis levels.
3. Bank balance sheets are now looking healthy and profits are back, with the disposal of bad assets. The crisis in lending also seems to be behind us.
4. Long-term unemployment will be a very serious challenge for 2014.
Looking ahead to 2014, there are a few trends you should keep your eye on. On the economic front, I think we’re going to have a relatively uninteresting policy year, due to where we are right now and how corporate tax reform has died again in Congress.
This means politics will be front and center. What I see happening this year is Republicans will go into the election talking only about the Affordable Care Act. On the flip side, Democrats have an advantage this year, as a rebounding economy always helps the party in the White House. Interesting things will happen at the crossroads between the economy and politics this year.
As for what’s happening on the world stage and international economic factors, I see these more of a sideshow at the moment. There aren’t strong enough pockets in the world that they’re driving activity here nor are there pockets of weakness that are so awful they are upsetting our activity.
In terms of real estate, the leisure real estate market and housing in general are all experiencing significant recovery points. But I would use caution moving forward in this in terms of the future for interest rates—the risks are balanced unevenly right now so it’s best to be cautious.
For timeshare developers specifically, I’d encourage expanding operations because the economy looks good—but I’d be sure to lock in financing before interest rates rise. Odds are pointing in that direction and the risks are higher than they’ve been in a long time, so I’d act accordingly.
For much more from Kevin Hassett, please see the interview in the next Developments magazine, available digitally and in print in February.
Kevin Hassett is a senior fellow and the director of Economic Policy Studies for the American Enterprise Institute.