ILLWORK

By James R. Birdsong Senior Vice President National Sash & Door Jobbers Association

F Forecasting the long-term economy with any degree of accuracy seems to be slightly more risky than forecasting the weather a year in advance (although the Farmer's Almanac tends to be pretty good about that). Although intense resources go into predicting the economy, it seems to twist and defy accurate prediction. Even Alan Greenspan, chairman of the Federal Reserve, with his super polished crystal ball, seems to contradict himself on a regular basis.

According to the Wall Street Journal, "For three years now, Alan Greenspan has morphed back and forth between the New Economy's most powerful advocate and its most menacing skeptic."

While we are currently riding the crest of a record breaking economic expansion in which producers and distributors of millwork and other building materials have certainly participated, most indicators point to a slowdown next year, and most indicators seem to point to a peak in the economy. A fickle stock market, concern by the Federal Reserve for a recurrence of inflation and an ever tightening labor market are coupled with concerns, real or imagined, over Y2K and the fact that the year 2000 is an election year thrown into the mix. Given all these factors, the extent of a slowdown may be just as feasible to predict as when my office employee pool will win the lottery!

But all is not completely murky. We need to closely watch several key market indicators.

The possibility of a stock market correction, the increasing shortage of labor, pressure to increase prices and wages, a low savings rate among U.S. households and a widening trade deficit are a few ofthe factors that can play a part in how the economy will perform next year. Of significance to those who are part of the housing delivery system is the mortgage interest rate. Remember a 17o increase in the mortgage rate prices 450,000 homebuyers out of the market.

Total housing starts and permits have very recently dipped, however the housing market overall remains healthy. The market seems to have peaked, but with unemployment low and mortgage interest rates still reasonable, the future appears to be solid. Most projections predict a slowdown in housing starts next year and the National Association of Home Builders is projecting a decline of I .3vo compared to 1999.

Tip O'Neill once said that "all politics is local," and so it is with many aspects of the economy. Certainly all regions of the country do not perform uniformly; how the housing market and those related industries will perform is, of course, regional. Some of the factors considered key to predicting regional growth include: competitive business costs, growth of high-tech industry, attraction of skilled workers and expanding export markets.

And with many local government officials concerned about urban growth or urban sprawl, crowded schools and clogged roadways, it is imperative to monitor and be active in local public policy issues.

When all factors are considered, it is still important to remember that it is not the short-term but the overall future of the industry that is important-and that temporary adjustments will continue to take place. With housing growth in a long-term upswing, and an increasing population and market base, there is no reason to believe that overall the market should not continue to prosper for years to come.