Kerr: Are current economic trends logical?

Do you remember the original “Star Trek” where the crew of the USS Enterprise would beam onto a planet, face all kinds of strange and seemingly inexplicable phenomena and then during one program sort it out and set things right?

Oh, how I envied them. Especially now. Because I would surely ask Mr. Spock, the Vulcan science officer so wonderfully played by Leonard Nimoy, “could you set your tricorder on ‘economics’ and please tell me what’s going on with our economy?”

Something would tell me he would say that his instruments don’t allow him to make sense of something so confusing.

With apologies to Mr. Spock, perhaps it’s time for at least a survey of what seems to be going on. I would quickly add, like most people who track the economy, nothing – and I mean nothing – is turning out as we hoped or expected it would, just a year ago.

Let’s start with housing, one of the foremost industries in Northern Virginia. Four years ago, I sold the family house in Falls Church. It went for a tidy sum, after which it seemed to hold its value, increasing a few percentage points each year. Ah, but come the summer of 2021, when the new owners decided to sell the place, it went for 40% more than what they paid for it. Even at this high listing price, there was a bidding war.

This has been happening everywhere – Falls Church, Arlington, Fauquier and even out in the country. My neighbors, wanting to retire to Delaware, sold their house, “as is,” even though, like most homes, it needed a little work. No staging. Not even that aggressive a marketing plan. It was snapped up, above the listing price, within four days.

It should be a real estate agent’s dream. The only problem is they don’t have enough properties to sell. If you have a house you want to sell, you could do very well. Thing is, everything else on the local market has increased in price dramatically. Even places like Boise, Idaho, and Wilson, N.C., can’t satisfy the demand for housing.

A couple of things partly explain this. Foremost are the interest rates; 2.5% to 3% for a 30-year mortgage, depending on your credit and income. Another factor, something many didn’t quite pick up on, is the savings rate. During the past 18 months of COVID, we’ve spent less money traveling and eating out and have tended to put more in the bank.

Then there are cars. What gives? My first car, a 1964 American Motors Rambler, didn’t have a single chip in it. They hadn’t been invented yet. Today, my 2020 Toyota Highlander has more computing power, going away, than what was available to the 1980s space shuttle.

Unfortunately, during the pandemic, computer chip makers all over the world closed, and now there is a shortage. Making a chip isn’t easy – as many as 700 steps are required. And although they make tens of thousands at a time, my Toyota requires a lot – and they must be shipped from Asia. So, the chip shortage equals a car shortage, which means super high prices for cars and a big demand for used cars. You would have liked my Rambler.

Then there is the employment shortage. Fast food managers, store and restaurant owners, local governments and construction contractors are desperate for workers. The reasons are a little complicated. White-collar workers have become accustomed to working at home, and if a job change means going back to an office, they’re not interested. Another reason is the haphazard moratorium on evictions for non-payment of rent. So the financial stress for some isn’t the same as usual. As many as 75,000 people in Northern Virginia may have been affected by this market distortion.

Another factor is daycare. A nearby daycare center has been closed for over a year, and others are taking few children. This limits the options for families and single parents who want to go back to a regular job but don’t have daycare.

So, how to sort this out? It’s difficult. The economy suffered a major shock that has resulted in major distortions, such as with housing and jobs. And we may be facing a complete change in the way we go to work. That’s going to have dramatic changes on the economy as well. It already has.

David Kerr is an adjunct professor of political science at Virginia Commonwealth University and has worked on Capitol Hill and for various federal agencies for many years.