Kuehl forecasts partly sunny, partly cloudy recovery for US economy

CCIM Kansas City kicked off its 2021 monthly breakfast series last week with the annual economic forecast by Dr. Chris Kuehl, managing director and co-founder of Armada Corporate Intelligence. Chris Williams, CCIM, of Highlands Development Group and CCIM Kansas City president, moderated the virtual event.

Kuehl anticipates that 2021 will see five positive changes which will affect the economy and five negative changes.  

The first positive change is the vaccine rollout.  Kuehl acknowledged that the vaccine rollout is slow, complicated and bureaucratic.  However, he said he’s “pretty confident” that by March, the vulnerable population will be vaccinated.  He expects that by mid-summer, the United States will have achieved herd immunity, or something close to it. 

Kuehl believes the second positive change is that lockdowns will start to lift by the second quarter.  The lifting of lockdown restrictions will improve job numbers, particularly in the service sector, and spur spending.  Service jobs will come back very quickly, because there’s no barrier to entry.

“When the service sector starts to come back, our spending will go back to what it used to be. Rather than spending as much money on things as we are now, there will be more interest in spending on services, something that’s been cut off for the last year,” Kuehl said.

The third positive change is the improvement of trade relations with certain key partners in Europe, Japan and Canada, but not China.

Kuehl anticipates permanent changes in work patterns as the fourth positive change. For example, many employees will see a 3/2 week - three days in the office and two days working from home.  However, those who work in collaborative environments and sales people likely will not have that option. 

The fifth positive change, which could benefit some sectors but could damage others, is the recent political shift.  Kuehl said there will be a big emphasis on green, more stability in the medical sector and an emphasis on infrastructure.

Kuehl said the first negative change to anticipate is that the retreat from pandemic protocols will be slow and there will be setbacks, such as mutations of the virus and bureaucratic barriers.

The second negative change is that the business and investment community will be cautious in making moves until they can better assess the new administration.  Kuehl said there are estimates that $2.5 to $4 trillion are waiting to be invested.

The third negative change, according to Kuehl, is that confrontations with China will accelerate and affect trade patterns; followed by the his fourth adverse change: consumers will have to decide when (or even if) they want to go back to their old habits.

Kuehl identified the lingering political divisions as the fifth and final change, complicating policy development on several issues; including economic stimulus, immigration and cultural conflicts.

Kuehl predicts that the United States will see a lot of progress toward economic recovery in 2021, but full recovery will not occur until the end of the year or early 2022, and recovery is volatile. 

“There are lots of factors that are going to have to be worked through in the next several years and we’re going to have periods where there is substantial recovery and then a decline and then a substantial recovery, partly because it is still global,” said Kuehl. 

Kuehl said he did not anticipate that there will be changes to Section 1031 exchanges or REITs in the foreseeable future because both keep money active and moving. 

Kuehl also anticipates that the hotel and airline industries and everything connected to business travel will begin to see a comeback by late May or early summer. 

Kuehl said he predicts that the United States will continue to emphasize reshoring.  But, unlike the prior administration which relied on tariffs and limitations, Kuehl said he believes the Biden administration will push export promotion.