Port Authority’s Alex Heil Talks Market Fundamentals | Labor Market, Consumer Sector Still Strong, but Tariffs Pose Major Problems

CAPRE: Thanks for chatting with us Alex. Let’s dive right into the market fundamentals. How strong is the New York City labor market? Are there cracks appearing?

Heil: The city has been on a pretty incredible run since coming out of the great recession. There were several years when employment growth was above 2%. historically that’s a very strong performance. But what we’re seeing now is a general slow down of growth – a reversion to the mean, which is also likely to be more sustainable. It’s already started to happen and I’d expect it to continue into 2020. On a related note, we’ve also seen a diversification of the regional economy. Prior to the financial crisis, there was much greater emphasis on employment in the financial sector. But since then more growth has occurred in professional business services, healthcare, education, and other sectors which aren’t your typical finance/real estate/insurance brokerage firms.

CAPRE: How strong is the New Jersey labor market?

Heil: The ten-year recovery since the great recession for New Jersey has been a bit more of a struggle. It took until early 2017 for the state to recover employment lost in 2008-2009. That’s an eight-year recovery, which is about twice as long as it took in New York. Some of those same sectors I mentioned above with regard to New York City however, are growing as well in New Jersey. It’s a similar pattern, but it’s characterized by less growth in New Jersey.

CAPRE: As an economist, what are your concerns over the next 12 months?

Alexander Heil, Chief Economist, Planning and Regional Development Department, Port Authority of New York and New Jersey

Heil: Nationally, I think that a lot of concern has been with our current trade policy. It’s no secret that tariffs imposed on imported goods from China or elsewhere, or retaliatory tariffs put on the US, have been a huge burden for the economy. The economy has been resilient, and is still growing, and many economics, myself included, are a little bit surprised. However, if we’re looking at particular sectors like farming or manufacturing, some have been hit much harder than others. And business investment is still not growing.

So there’s uncertainty and general cloudiness when looking to the next year as to where and how to extend business. I feel 2020 will be weaker than what we’re seeing in 2019, especially since these tariff effects will end up building on each other. Other factors, such as climate change, also pose risks. Look at what PG&E did out in the western states – that can’t keep happening. There are significant question marks for 2020 and beyond.

CAPRE: What are the economic tailwinds you anticipate over the next 12 months?

Heil: I think it’s largely income growth, which has finally materialized. That’s more of a function of an expanding labor market, where employers have to pay more to attract and retain employees, and some of those effects have resulted in rising wages. That’s a real plus. Consumers as a result of that have continued to spend. And it still looks like there is potential for continued growth in the consumer sector. Households have kind of cleaned up their balance sheets. And the labor market is still strong – it continues to produce net gains month over month, which is more than what we’d require to keep up with population growth alone.

CAPRE: What are you looking forward to most about CAPRE’s New Jersey Apartment Summit? We’re looking forward to hearing what you have to say about these topics and more.

Heil: I think the format of this even is just great. For my session, I love that there will be a back and forth with me and my colleague from JLL, Ryan Severino. That will be fun. I’m always happy to do an event that gets me out of the office to get a real sense of what’s going on out in the economy and how people are talking about it. You can look at data all day long but at the end of the day, it’s people that are affected.

Dr. Alexander Heil is the Chief Economist in the Planning and Regional Development Department of the Port Authority of New York and New Jersey. As Chief Economist, Dr. Heil provides strategic leadership on regional economic issues to the agency. He is responsible for developing and managing the agency’s economic research and analysis agenda, helping to ensure that the agency’s major investment and policy decisions are informed by sound economic principles and analysis, and increasing awareness of the region as a unified economic entity by regional governmental, business, and civic leaders. Hear more from Heil today at CapRE’s New Jersey Apartment Summit, where he will participate in the 8:50 am session, “Economic Forecast with JLL and Port Authority Economists: Macro Factors, Including Trade War, Interest Rate Uncertainty and the Impact on the Micro Tri-State Economies and Real Estate Outlook.”