Most remodelers should escape a downturn in this recession because of its nature. Most past recessions resulted from sharp increases in inflation and a tight monetary policy leading to sharply higher interest rates. This recession has been caused by a sharp downturn in business investment, especially in the manufacturing and technology sectors. Consumers, however, are continuing to spend, albeit modestly.
The current recession also should not lead to high unemployment rates, which benefits remodeling demand. Unemployment rates during the last recession (1990-91) reached nearly 8%. We do not expect the unemployment rate to exceed 6% in the current recession.
Another positive factor is the economic stimulus program. While it was still being debated in Congress as this column was being written, we assume it will lead to improved consumer confidence.
Despite these positive indications, remodelers should be cautious. There are many uncertainties present in the economy stemming from the different nature of the current recession and the long-term economic effects of the September terrorist attacks. --Robert J Sheehan II is principal in Regis J. Sheehan & Associates in McLean, Va.