Economist says 'real' recovery has begun, despite government

The nation's economy has begun a "real" recovery with 2 percent to 2.5 percent growth over the next year. But it could grow even faster if businesses and consumers are able to see some economic certainty.

That's the contention of Mark Dotzour, chief economist and director of research at the Texas A&M University Real Estate Center. In remarks Wednesday at the 86th Annual Soil Management and Land Valuation Conference at Iowa State University, Dotzour said that certainty may come when the effects of the federal Patient Protection and Affordable Care Act is known.

"Right now, we're seeing employers like Regal Cinemas telling their managers across the country to make sure their part-time employees work no more than 29.99 hours each week," Dotzour said. "That way, they won't have to comply with the new health care law with its unknown expenses.

"There's five years of pent-up business and consumer demand. People are beginning to decide that they can buy things they have delayed purchasing due to the economic uncertainty."

Dotzour said the housing sector, which has been a head wind restraining the economy has turned around in recent months to become a tailwind propelling growth.

"We have a shortage of houses in some parts of the country," Dotzour said. "Builders can't construct them quick enough to meet demand because they are unable to get bank financing.

"The government, in the form of the Comptroller of the Currency, has adopted a stance against banks making real estate construction loans. The economy is expanding in spite of government, not because of it."

Dotzour said Federal Reserve Chairman Ben Bernanke is likely to continue the quantitative easing program, continuing to purchase mortgages and bonds to keep interest rates low and stimulate consumer spending. Bernanke himself has stated the Fed would maintain the program until the nation's unemployment rate falls to 6.5 percent.

Dotzour added that the jobless rate is unlikely to fall to that level until the end of 2014 or early 2015. He discounted concerns that the Fed's actions are setting the country up for a period of runaway inflation.

"In order to have rising inflation, you have to have wage increases," Dotzour said. "We are not likely to see wages increase in the near future.

"The last time we had a spike in inflation was 1979 and 1980 when wages shot up and inflation hit 12 percent."

Dotzour said farmland prices will continue to rise with demand, saying many investors are frustrated with bank CD rates.

"They would rather buy a parcel of good quality farmland where they are seeing a potential return on their investment," he said.