In a replay of the good-news-is-bad-news scenario, those claiming we are in recessionary times were dealt a body blow by the latest jobs report. Despite the Federal Reserve’s valiant efforts to slow the economy, U.S. jobs soared by half a million in January. This was reported just a week after the chairman of the Federal Reserve, Jerome Powell, staked out an aggressive position for tapering off interest rate hikes.

The U.S. economy beat forecasts and delivered once again. U.S. payrolls increased 517,000 for January, nearly triple the consensus forecast of 185,000. The unemployment rate of 3.4 percent is now the lowest in 53 years.

Chairman Powell had hoped for an economy that was slowly slowing, but instead received these strong numbers. The market seized upon the “good news” and considered it “bad news.” The likely result is that interest rates will remain high for the time being and longer too, as the Fed struggles to slow the economy.

In January, the Nasdaq Composite registered its fastest start to a new year in 20 years. The tech-heavy index finished up 10.7 percent for the full month of January, compared to an 8.96 percent tumble for the month of January 2022. This year’s gains were helped by expanding price-earnings multiples that investors, particularly individuals, were willing to pay for growth stocks, due to their optimism for continued declines in inflation and expectations of the Federal Reserve winding down rate hikes.

The S&P 500 also had its best start since 2019, ascending 6.18 percent in January after declining almost 6 percent at the start of 2022. The Dow Jones was up as well, registering a 2.83 percent gain this past month.

What’s driving this year’s Nasdaq run? Within the Nasdaq 100, Warner Bros Discovery (WBD), MercadoLibre (MELI), Atlassian (TEAM), NVIDIA (NVDA) and IDEXX Laboratories (IDXX) were big gainers by percentage.

NVIDIA is the only true mega cap among that list. However, Google parent Alphabet (GOOGL), Amazon.com (AMZN) and Tesla (TSLA) were all outperforming the Nasdaq in 2023. Apple (AAPL) was roughly in line, while Microsoft (MSFT) was lagging.

Inflation was another bright spot in the new year. Both the Consumer Price Index (CPI) and personal consumption expenditures (PCE) reports were more favorable than many observers expected. The PCE registered 5 percent annual inflation in December, a deceleration from November’s 5.5 percent reading and October’s 6.1 percent.

Is the market in a relief rally or a dead cat bounce? Chairman Powell has taken a stern stance against inflation, vowing to see his struggle against inflation to the end. However, in a good-news-is-bad-news scenario, even with inflation abating somewhat, the economy has provided a strong jobs report, much stronger than the Fed would have liked.

Inflation is sticky. Yet to come for the market is the reopening of China, which is expected to be inflationary as demands for goods, both by households and manufacturing, will put upward pressure on prices globally. Our trade with China has just reached a record high. As supply chain issues choke distribution, higher commodity prices will result in continued higher interest rates. The ongoing war in Ukraine will also fuel inflation. Other than some moderation in energy prices, there just doesn’t seem to be any good news on the inflation front, and a strong job market doesn’t help inflationary pressures.

Chairman Powell has a conflicting job. He wants a weaker economy so he can have a soft landing, but full employment is one of the primary mandates of the Fed. And the jobs report was strong because the economy is strong. With the war raging and with China reopening, inflationary pressures will remain high.

In additional troubling news, the U.S. is approaching its debt ceiling after which the Treasury would be unable to pay its bills on time. It is hard to imagine the consequences of the U.S. failing to pay its bills. Chaos would ensue. Chairman Powell says it is not the purview of the Fed to raise the debt limit. Congress must do that. So, with Congress locked in a stalemate, we appear headed toward a major problem, with the consequences uncertain. Once again, we find ourselves in a dilemma. Can the debt crisis be avoided? Time will tell, but historically the budget crisis gets solved at the last minute. That time is fast approaching.

An adage of the marketplace is that it is better to be in the market than to time the market. In other words, time in the market rather than market timing. It still holds. Investors are still wise to have a diversified portfolio.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post Despite burgeoning pessimism, economy remains strong | OP-ED appeared first on Daily Journal of Commerce.

Where have we been and where do we go from here?

Where is here and how did we get there?

There is a toxic brew of rising inflation and a slowing economy. It could be called stagflation.

The U.S. economy, guided by Federal Reserve policies, has lurched from one side of the boat to the other. It appears as though the Fed is unable to chart a straight line of growth, so when encouragement is needed, it does too much, and when a slowdown is needed, it also does too much.

The financial crisis of 2007 to 2009 was caused when the Fed, following an easy money policy, overheated the economy. Then, as a result of too much stimulus, inflation predictably followed. A reasonable dose of inflation is OK; the Fed itself has set a target rate of about 2 percent per year. But the Fed overshot their target by a wide margin and inflation slipped the bounds of the Fed and ran wild. We are in a similar, although not yet as extreme, situation today.

Then and now, easy money policy resulted from a desire to have a robust economy. Back then the housing market was stimulated by ultra-loose mortgage lending standards under Fed chairman Alan Greenspan. Variable mortgage rates promised cheap interest rates. Recently the approach was to bring interest rates to near zero, with mortgage rates reaching historic lows. Perhaps, in the background, there was a desire for low interest rates to make the increase in the national debt from the massive fiscal stimulus of the COVID lockdown easier to service.

Whatever the reason the result was cheap money and runaway inflation.

The Russian invasion of Ukraine has exacerbated inflation with logistical bottlenecks caused by the war interrupting supplies and raising the price of oil and food dramatically.

Faced with the recent rise in inflation, the Fed has charted a policy of very high interest rates in an effort to curtail demand and, therefore, economic activity. A recession or even worse could result from these policies. The question is: does the Fed have control of the economy? At the moment, it appears that they do not. The last time something like this was attempted was by Paul Volker, then Fed chairman. Mr. Volker saw runaway inflation and set out to break inflation by raising interest rates. Interest rates rose to a very high number and inflation was halted, but at a terrific cost to the economy. However, as inflation was curbed, the market bottomed and fully recovered its prior peak in just 83 days.

Now, once again faced with inflation, the Fed wants to seriously tighten the money supply and seriously raise interest rates to slow the economy. The result, so far, has been the worst start to a year for the equity market since 1970. Not just equities, but virtually all asset classes have suffered.

The Nasdaq composite is down about 30 percent in the first six months of this year. Individual stocks are worse, in some cases breathtakingly so. Is there any good news here?  It would be accurate to say, there is none. Well, the price earnings ratio of S&P stocks is about 15.4 percent, just a bit below its 15-year average of 15.7 percent, so stocks are cheap right? Could they get cheaper? According to Fact Check, analysts expect that S&P companies will have double-digit earnings growth in the third and fourth quarters of 2022. But other investors are wary, saying that the Fed may have to act even more aggressively if inflation remains high.

Stocks are cheaper than they were, but they may not be cheap.

The Fed says their business is not done, and we can expect more of the same until inflation buckles. Does the economy have to buckle too? Federal Reserve Chairman Powell suggests that he is prepared to see the economy suffer in order to contain inflation. What does that mean for the economy, the markets and households?

Already, models such as the Fed’s Atlanta forecasting model, are pointing to no year-to-year increase in U.S. Gross Domestic Product. Other indicators also suggest difficult times ahead. Since the markets are based on the profitability of companies comprising the markets, an investor can infer that the markets will be under pressure. If the economy suffers another flat or negative growth quarter, we would meet the definition of a recession: two quarters in a row of negative growth. Not until inflation slows and the markets suffer, can we expect any relief from inflation. So, both investors and households will have to tighten their belts. Unless of course the Fed changes course and begins to loosen the money supply, or inflation appears to be losing its grip. Then, depending on how much damage has been done to the economy, one can expect that the economy and markets will resume their upward trajectory.

While markets are down, they have yet to show the panic selling that usually accompanies the end of a bear market. If history repeats itself, we have further down to go.

In the meantime, the wise move is to stay the course, invested in a diversified portfolio of companies with earnings. As one sage investor once said: you make your money in bear markets, you just don’t know it at the time.

Expect a volatile market on the way, but stay the course.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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By MIKE SCHNEIDER
Associated Press

Bye-bye, Bismarck. So long, Sheboygan.

Those cities in North Dakota and Wisconsin, respectively, are two of 144 that the federal government is proposing to downgrade from the metropolitan statistical area designation, and it could be more than just a matter of semantics. Officials in some of the affected cities worry that the change could have adverse implications for federal funding and economic development.

Under the new proposal, a metro area would have to have at least 100,000 people in its core city to count as an MSA, double the 50,000-person threshold that has been in place for the past 70 years. Cities formerly designated as metros with core populations between 50,000 and 100,000 people, like Bismarck and Sheboygan, would be changed to “micropolitan” statistical areas instead.

A committee of representatives from federal statistical agencies recently made the recommendations to the Office of Management and Budget, saying it’s purely for statistical purposes and not to be used for funding formulas. As a practical matter, however, that is how it’s often used.

Several housing, transportation and Medicare reimbursement programs are tied to communities being metropolitan statistical areas, or MSAs, so the designation change concerns some city officials.

In Corvallis, Oregon, the state designates certain funding sources to metropolitan statistical areas and any change to the city’s status could create a ripple effect, particularly when it comes to transportation funding, said Patrick Rollens, a spokesman for the city that is home to Oregon State University.

“I won’t lie. We would be dismayed to see our MSA designation go away. We aren’t a suburb of any other, larger city in the area, so this is very much part of our community’s identity,” Rollens said in an email. “Losing the designation would also have potentially adverse impacts on recruitment for local businesses, as well as Oregon State University.”

If the proposal is approved, it could be the first step toward federal programs adjusting their population thresholds when it comes to distributing money to communities, leading to funding losses for the former metro areas, said Ben Ehreth, community development director for Bismarck.

“It won’t change any formulas … but we see this as a first step leading down that path,” Ehreth said. “We anticipate that this might be that first domino to drop.”

Rural communities are concerned that more micropolitan areas would increase competition for federal funding targeting rural areas. The change would downgrade more than a third of the current 392 MSAs.

Statisticians say the change in designations has been a long time coming, given that the U.S. population has more than doubled since 1950. Back then, about half of U.S. residents lived in metros; now, 86% do.

“Back in the 1950s, the population it took to create a metro area is different than it would be to create a metro area in 2020,” said Rob Santos, president of the American Statistical Association.

Nancy Potok, a former chief statistician of the Office of Management and Budget who helped develop the new recommendations, acknowledged that officials in some cities will be upset with the changes because they believe it could hurt efforts to lure jobs or companies to their communities.

“There are winners and losers when you change these designations,” Potok said. “A typical complaint comes from economic development when you are trying to attract investments. You want to say you are part of a dynamic MSA. There’s a perception associated with it. If your area gets dumped out of an MSA, then you feel disadvantaged.”

Officials in some cities said they needed to research the impact of the change. Others were surprised to find their metro was on the list in the first place.

“Perhaps they made a mistake,” Brian Wheeler, director of communications for the city of Charlottesville, Virginia, said in an email.

While the city of Cape Girardeau, which is on the list, has a resident population north of 40,000 people, as a regional hub for southeastern Missouri, it can have a daytime population of more than 100,000 people, said Alex McElroy, executive director of the Southeast Metropolitan Planning Organization.

“It kind of seems misleading,” McElroy said of the designation change.

In a letter to the federal budget office, the mayor of Opelika, Alabama, urged that the proposal be dropped.

“The risk to vital services within our community, our state and the millions of impacted Americans across this country far outweigh any limited statistical value that might be gained from this proposal,” Mayor Gary Fuller said.

In a separate proposal, the U.S. Census Bureau is considering a change to the definition of an urban area.

The proposal made public last month would use housing instead of people for distinguishing urban from rural. An area will be considered urban if it has 385 housing units per square mile, roughly the equivalent of 1,000 people per square mile, under the new proposal. The current standard is 500 people per square mile.

The Census Bureau says the changes are needed to comply with new privacy requirements that aim to prevent people from being identified through publicly released data and it offers a more direct measure of density.

Some demographers aren’t sold on the idea of changing the definition of a metro area.

“It seems like everything is ad hoc, rather than having been determined by serious research,” said Kenneth Johnson, a senior demographer at the University of New Hampshire. “The definitions have been relatively stable since 1950. All of the sudden, they change these, and at least in my mind, there isn’t a compelling research-based process that has driven this decision.”

In Corvallis, Rollens joked that he was intrigued by the possibility of the city becoming a micropolitan area, suggesting the community could benefit from thinking small.

“We enjoy our small-batch craft beers and locally grown produce here in Corvallis, so I have no doubt that we would find a creative way to market our region if we ended up with a ‘micropolitan’ designation,” Rollens said.

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Bob Whelan grew up on Waverly Place, in Manhattan, fueled by espresso. His Italian mother used it to counteract what he suspects might today be diagnosed as attention deficit hyperactivity disorder.

He’d go on to fall asleep in his college business classes, which didn’t grab him the same as the earth sciences. A technical knowledge base, plus strong communication skills, aided him as a consultant for the oil and gas industry, and later as a mineral economist for the state of Oregon.

Since coming to ECONorthwest 21 years ago, Whelan has authored provocative studies questioning, among other things, the poverty-reducing capacity of a $15 minimum wage and the supposed strength of the Portland job market. He caused a minor panic at Portland State University, he says, after discussing how recycling, rather than saving trees, actually reduces them.

People always try to shoot the messenger, he said.

Whelan recently spoke with the 91��Ƶ. This interview has been condensed and edited for clarity.

91��Ƶ: Do you feel the credibility of your field is under attack?

Bob Whelan: Well, it’s the same with journalism, but it’s no different than it’s ever been. I’ve been working for 40 years, and I’ve seen a lot. I’ve lived the whole spectrum of things. People often think that what’s happening is unprecedented. That’s all B.S. They’re talking now about fake news. Well, did you forget about the Maine? Or the Gulf of Tonkin? Lyndon Johnson made up an attack to keep money flowing to the Vietnam War.

91��Ƶ: Those are examples, but there seems to be a level of distrust in institutions today that runs pretty deep.

Whelan: Yeah there is. Part of it seems to be this big separation. The fact that people here are shocked that Trump won is absolutely stunning. I can’t understand it.

91��Ƶ: People in the building industry have a hard time with the fact that young people, by and large, don’t seem to want to pursue skilled craft work.

Whelan: It’s a big problem. And you’re really going to run into it in two years. The thing is, we’ve had a really strong economy. I guess it’s because politicians can’t run on a strong economy. So both Trump and Clinton ran on the economy being terrible, the middle class is disappearing. Really? I mean, really? When I moved here 30 years ago, Ladd’s Addition was a dump, not a wealthy area like it is now.

91��Ƶ: Well some might say, Bob, you’re living up here in your liberal Portland bubble – but is the rest of the country seeing the same gains?

Whelan: Other parts of the country have seen much better gains than us – we’re actually not doing too well. Portland has just been a basket case in private-sector job growth. We rank near the bottom.

There are a lot of these lies for political purpose. Bernie Sanders was enormous at this. I would roll my eyes whenever he would talk. It was absurd. And Donald Trump, who of course is a whipping boy for everybody here, would do the same thing. He would say he’s going to bring back manufacturing jobs. And then what – do you want to work in a sock factory? Who the hell wants to work in a sock factory? That’s exactly what would happen if you put a 35 percent tariff on imports from Vietnam. There’s already a 20-something tariff on athletic shoes. There’s a 5-percent tariff on Honda Civics – I don’t know why.

In the construction world, you got a couple things going. You do have an overbuilding of hotels. There’s no doubt about it. There are openings for a couple different kinds of hotels. The very high-end, luxury hotels – the city could use, like in the Pearl District. That area is under-hoteled for sure.

But for the most part, tourism is nearing a peak in Portland, if not peaking. In fact, the latest tourism numbers show pretty much flat. This is because Portland benefited from ‘Portlandia,’ weirdly enough. There were ads for ‘Portlandia’ at bus stops in Denmark. It’s big in Europe. And they all come up here and look around. They shop. But they’re not going to come back a second time. Because this isn’t Disneyland; there’s nothing else to do. So that’s peaking and the international tourism is being hurt by Trump, and hotel prices are extremely expensive. A mid-week room at the Marriott here with tax and parking is over $300. Who can afford that?

91��Ƶ: Some of these hotels are catering to millennials.

Whelan: Because they’re the hot topic, and the traditional hotel doesn’t cater to them. So what they do is have these very nice lobbies and group-meeting things, [gestures to ECONorthwest’s furniture island] this kind of crap. And that’s – that’s nothing.

91��Ƶ: What about Airbnb and the rise of peer-to-peer room rentals?

Whelan: Airbnb – half its business is people who stay more than seven days. The average hotel stay is three days. Corporations don’t like allowing their people to use Airbnb, because of security.

We’re just overbuilt. We’re adding in the next two years 25 percent to the supply. The fundamental demand for hotels is only rising 1, 2 percent a year.

91��Ƶ: The Columbia River Crossing plan has been revived by the Washington State Legislature. What about tolling to pay for it here in Oregon?

Whelan: We may have no choice. Because right now, you’re depending on gas taxes and charging more for registration, and there’s a limit to what you can do. Plus, people are driving electric cars. Why should a guy who can afford a Tesla not pay anything toward the roads? Why should a guy on bicycle not pay anything for the pavement he’s riding on?

91��Ƶ: What about unions, are they going away for good?

Whelan: I don’t know. I think there will always be a need for some unions. The way I look at it is, managements can organize. Why can’t workers be organized? There are still companies that do not do a good job with employee relations, or are abusive, so I don’t think unions are gone.

If you have a union that really takes seriously training and advancement, and just doesn’t sit there, that is optimal. But if you’re part of a union that is just doing what’s basically extortion, like the longshoreman’s union – by the way, you wanna talk about the ‘1 percent?’ Longshore union members earn in the 99.4 percentile of wages in the state of Oregon. They are the ‘1 percent’ that Bernie Sanders was screaming about. They literally make more than a pediatrician, more than an experienced lawyer. And they don’t have to work – if they don’t work they still get paid. And their jobs are all unnecessary because they could all be done by machinery.

One of the problems that the construction unions have to worry about is robotics. Thirty years from now, robots will be doing a lot of the work in construction. It’s a concern.

91��Ƶ: CLT is a hot topic in the building industry and in Oregon. Some say new mass timber methods could help revive the timber industry. What do you make of that?

Whelan: The construction industry is very slow to adopt new ideas, because it’s just too risky. If you’re trying to develop an app, and it turns out to be a total bomb, what do you lose? You spend $20,000 worth of labor, and you chalk it up and go on to the next thing. But if you decide to build a building and use a material that is not thoroughly tested and it fails, they’ll take your house away. You’ll lose millions and millions of dollars. If someone dies on the job doing it, oh man, your conscience … Productivity in construction is slow – weirdly slow. That’s one problem with cross-laminated timber. Plus, there’s a lot of interest embedded in not using it.

91��Ƶ: Some opponents of CLT make the argument that by funding the testing of tall wood building concepts, government is “playing favorites.”

Whelan: That’s what government does. Your industry isn’t going to do it themselves. If you own a company in an industry, you’re not going to be doing expensive research, because most of the benefits are going to go to your competitors. So you depend on the government to do it.

Fracking, by the way, when it was brought up in the late 1970s, it was the federal government that was pushing the idea. People in the oil and gas industries thought it was a total waste of government money. “Government waste!” they would scream. Now it’s saving them.

91��Ƶ: It’s the time in the interview to talk about Trump. His idea for a border wall with Mexico – leaving aside ethical arguments, is it even feasible?

Whelan: No. It’s an imbecilic idea.

How the hell do you even put a wall in the middle of the Rio Grande River? It’s a waste of money, and here’s a very important fact: If you don’t have immigration, you have a declining economy. Take out first-generation Americans and the labor force in America is shrinking.

The other thing about immigrants: It’s amazing how many new businesses are started by immigrants. The ones who have the gumption and the courage to leave a country and wait in line to get into some other country – an arduous task – are the ones that have the most psychologically-predisposed behaviors to start new businesses. There is a 42-to-1 ratio of first-generation Hispanics to non-Hispanics starting businesses in the U.S. That’s huge. If there’s a trend to watch in Oregon, it’s the huge emerging Hispanic middle class. Without immigrants, we’re doomed.

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Real estate professionals interested in industry advice might want to mark this Thursday morning on their calendars.

The Oregon-Columbia River Chapter of the Institute of Real Estate Management is hosting its annual forecast breakfast. The event runs from 7 a.m. to 9:30 a.m. and is located at the Oregon Convention Center.

This year will be the 25^th installment of the yearly real estate update and will feature an office forecast by Mark Friel of Jones Lang LaSalle; an industrial forecast by Paul Breuer of Colliers International; a multifamily forecast by Greg Frick of HFO Investment Real Estate; a retail forecast by JJ Unger of NAI Norris, Beggs & Simpson; and a finance forecast by John Swanson of Umpqua Bank.

William Elliott, IREM association executive, said more than 600 people are registered to attend this year. Tickets are $70 ($75 at the door); for more information visit, .

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In one of Aesop’s fables, a wise ant once said to a grasshopper, “It is thrifty to prepare today for the wants of tomorrow.”

That could very well be the moral of the story for a report issued last week to the governor and the state Legislature, by the State Debt Policy Advisory Commission – a team led by Oregon State Treasurer Ted Wheeler tasked with assessing Oregon’s financial health and debt capacity.

Citing revenue shortfalls, the commission recommended that “no net increase in general fund-backed debt be authorized” for the remainder of the biennium. That could spell trouble for groups seeking state-funded capital financing.

“Right now, it doesn’t really matter what the project is,” said Sen. Richard Devlin, D-Tualatin, a member of the debt policy committee. “I think what the debt policy committee is saying is: ‘Do not issue any additional debt in either (general obligation) bonds or lottery bonds unless you absolutely have to.’ ”

In part because of a weakening global economic climate, the Oregon Office of Economic Analysis reported in December that general fund revenues for the 2011-2013 biennium are expected to decrease $277 million from 2011 projections to $13.7 billion.

Because of $167 million in new general fund debt – authorized by the Legislature in the 2011 session – the advisory commission reported that the state will slightly exceed its historical target of general fund-backed debt through the remainder of the biennium.

The state attempts to keep debt service as a percentage of general fund revenue to a maximum of 5 percent in order to maintain its favorable credit ratings. At the end of the current biennium, that ratio will be 5.02 percent.

The state’s lending capacity is expected to return by the 2013-2015 biennium, with the ability to lend $640 million in general fund-backed obligations per year, as well as $619 million in lottery bonds over the course of the next two bienniums – assuming no additional spending takes place in 2012.

The recommended hold on spending, however, is not likely to affect requests for direct revenue bonds, which are typically paid for by a dedicated revenue stream associated with a project, such as rent or tuition.

Di Saunders, spokeswoman for the Oregon University System, said it plans to seek at least $120 million in Article XI-F bonds for five university construction projects. Those include: Oregon State University’s $43.6 million Student Experience Center, a $30 million residence hall at OSU, a $9.58 million renovation of the east wing of OSU’s Memorial Union and the $65 million Oregon Sustainability Center.

Even though XI-F bonds are technically general obligation bonds, they are not paid for with money from general fund coffers, Saunders said.

“We are still in the tail of this recession, but we are optimistic that we can move the few projects that we do have on deck forward and so we’ll be working very closely with (legislators) to continue to answer their questions and remind them about the distinction between the bonds that we’re seeking and the ones everyone is asking for kind of a hold on,” Saunders said.

That doesn’t mean that funding is a sure thing by any means.

Several of the requests are continuations of discussions that the Legislature deferred in July. And the viability of private-sector leasing opportunities at the Oregon Sustainability was questioned in September.

While Devlin said the commission’s recommendations were not aimed at XI-F bonds, he did say all requests would need to be considered carefully.

“We have not suggested any restriction on those (XI-F bonds), although we would still believe, as we have done in the past, that we would be reasonably prudent in the use of those,” Devlin said.

The state does have the capacity to cover approximately $223 million in lottery bonds, because it restructured some of its existing debt in 2011. The Legislature authorized spending for an equal amount of lottery bonds during the last session. Devlin said projects outside of that spending scope – unless they are critically important – have little chance of moving forward.

But competing interests for money are lining up, and one of the projects vying for money is a new veterans home in Lebanon.

“We think the vets home will begin construction this fall,” Linn County Commissioner Roger Nyquist said. “What’s not clear is how the Legislature deals with the inequality of requiring Linn County residents to make a $10.5 million payment for the federal match and then, down in Roseburg, the Legislature decided (it) would take care of that.”

In November 2010, Linn County voters approved a 10-year property tax levy at 19 cents per $1,000 of assessed value to raise money for a federal match program. The state awarded Linn County a contract to construct the veterans home shortly thereafter, Nyquist said.

Then, fewer than 30 days after Linn County made a $10.5 million payment to the state, Nyquist said, legislators decided to cover the entire $10.5 million for another veterans home in Roseburg.

“So what we’ve said is, ‘You’re going to do it for Roseburg; you need to do it for us,’ and so if there’s a lottery bonding package we’d like to be included in it,” Nyquist said.

But Devlin said it is doubtful the Legislature will issue that money to anyone – this year, at least.

“Prior to our most recent couple of debt policy advisory committees, I was saying the chances (that projects will get funding) were slim,” Devlin said. “Now I’m saying the chances are – and this is just me; it’s not the Legislature, nor is it the presiding officers of any of the chambers – I give it between zero and 1 percent.”

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Just when you thought you could rest easy on the heels of good news…well, you can’t. Sorry.

The nation added 80,000 jobs in October, the 13th consecutive month of job gains. Yet despite this morsel of optimism, according to Tim Duy of the , Oregon has a greater than 50 percent chance of going back into a recession by early next year.

Average hourly wages across the country rose five cents to $25.19, the number of long-term unemployed people fell 366,000 and the unemployment rate dropped slightly from 9.1 percent to 9.0 percent according to the

“Overall, while this report is not good enough, several key numbers are now moving in the right direction,” Ian Shepherdson, an economist at High Frequency Economics, said in the Port.

The Oregon Economic Forum’s shows that in the past six months, the composite of sectors that are represented in the Index have faltered, dropping 5.8 percent points.

, the biggest factor in the potential recession is the ongoing financial instability in Europe coupled with the weak housing market and their impacts on our already dampened economy. The good news? Duy says that because we’re already so depressed, the recession will seem mild in comparison to the Great Recession. Yahoo!

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In all honesty, I’m worried about the near future of the entire built industry.

While I’ve never considered myself an optimist, I’ve had complete confidence over the first half of 2011 that the industry was on track for a slow and gradual recovery. But ever since about two months ago – coincidentally when the U.S. debt issue hit the mainstream media – very little positive news has come out of the industry.

Not only has the recovery stopped, but it seems as if the fears have shifted from “How long will this last?” to “How bad is it going to get?.”

It started with the American Institute of Architects’ Architecture Billings Index, which has not only fallen each of the last five months, but has dropped at a sharper rate each successive month. The ABI is an indicator of demand for architectural services, and represents a six- to nine-month lag in actual construction spending.

On the same day that the AIA released its most recent news about architectural billings, the Associated Builders and Contractors released its , a measurement of current construction loads for contractors. While the indicator showed a 10 percent increase from the previous quarter, ABC officials were quick to point out it doesn’t mean much.

“While the increase in construction backlog appears to be good news at first glance, taking a broader look reveals that the rise in the nation’s construction activity may be a reflection of the economic momentum that existed several months ago, but is now beginning to weaken,” said ABC Chief Economist Anirban Basu.

It seems, to me at least, that when we all saw a light at the end of the tunnel last year, the people who had sensible projects went forward with them. But while that momentum was nice to see, a lot of the fundamental problems – financing, overbuilding, etc. – have not been righted yet. Add that on top of the concerns that our government is in more financial trouble than we can imagine, and the outlook for the industry starts to look a lot less promising.

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These have been some rough weeks, but if the S&P downgrade of the country’s credit rating is an indication of anything, I fear for the future as the fabric of the modern world unravels into savagery. What to do? Rig up a renewable source of energy to your building and stockpile ammunition.

GOOD magazine posted last week a that breaks down the cost, usage and other useful metrics for renewables in the U.S. While it doesn’t tell you where to find a wrist-mounted crossbow, it does make understanding the state of renewables in the country easy as from the back of a gas tanker.

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After a projected decline in construction spending this year, the American Institute of Architects expects construction spending to rebound, and even increase, in 2012.

According to the AIA‘s semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, nonresidential construction spending is expected to decline 5.6 percent from a year previous by the end of 2011. Then in 2012, the same forecasters expect spending to increase by 6.4 percent.

AIA Chief Economist Kermit Baker pointed toward budget shortfalls at the government level, the ripple effect of overbuilding, a depressed housing market and rising costs of key construction commodities as the main factors leading to the decline in construction spending.

“Spending on renovations of existing buildings has remained strong, but depressed demand for new construction isn’t likely to improve until next year, led by the commercial sector: offices, retail and hotels,” he said.

The survey shows that construction spending in the commercial/industrial sector is expected to drop 6.5 percent this year and rise 11.8 percent next year. Moreover, the institutional sector is supposed to drop 3.4 percent this year and rise 4.4 percent the next.

Out of all the sectors listed, new construction spending on health care facilities is the only one expected to rise this year with a predicted jump of 1.8 percent.

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