Two years ago this week, I reported that in the final days of June 2009 an economist named Peter Ricchiuti declared that the recession was over. At the time, it most certainly did not feel that way. This was before people were talking about economic "double dips," because no one believed we had risen out of the first dip.
Lo and behold, in September 2010, the National Bureau of Economic Research announced that the recession, defined as a decline in gross domestic product for two or more successive quarters, had in fact ended in June 2009.
I heard Ricchiuti, a professor at Tulane University in New Orleans, speak again last week.
A few words about Ricchiuti: There's no question he's an insightful economist, and one of his keenest insights is that economists can be boring. So he spices his presentations with irreverent humor. For example, on the topic of dry economic presentations, he recounts listening to a panel featuring an economist, an actuary and a lawyer and wondering why the government still feels the need for waterboarding.
He began his talk last week with a quick look at the performance of travel industry stocks since the recession ended: United and Delta are up 40%, Marriott is up 50%, Host Hotels is up 100% and Starwood is up 135%. He focuses on stocks, he said, because they're a leading indicator; they show where we're heading. ("Everything else is noise, kind of like the buffet at a strip club.")
Wall Street, he said, has taken note of increasing occupancy rates and a weak pipeline for new hotel builds, as well as the rebound of corporate and group travel, and assumes that travel in North America will grow at 6% to 8% and internationally at 3% to 5% in the next 12 months.
He believes it's a great sign that Hilton and La Quinta are preparing to go public. (He also took a moment to explain that "La Quinta" is Spanish for "next to Denny's.")
"People are looking for opportunities," Ricchiuti said. "Private equity has lots of money and is trying to find a place for it. And the weak dollar is very good for international buyers."
The idea of trying to put an absolute number on national debt is "crazy," he said. To underscore the lack of direct correlation between debt and economic prosperity, he noted that our lowest debt since World War II occurred during the Carter administration, "a pretty miserable economy." And he noted that although the absolute debt is high, very low interest rates mitigate the burden.
Nonetheless, he predicted a lowering of entitlements and higher taxes in the next 15 months. Who will be paying more? "If your family uses the word 'summer' as a verb, you will be," he said.
Ricchiuti belittles the popular sentiment that the economy is on the wrong track. "This is because most Americans are wrong," he said. "If the majority were right, the majority would be rich."
He noted that in the early 1990s, two-thirds of Americans thought the economy was on the wrong track, and eight years of prosperity and growth followed. In 2000, on the cusp of the dot-com bust and subsequent stock market crash, 80% felt the economy was headed in the right direction.
His No. 1 concern for our future centers on immigration restrictions. "It will bite the U.S. on the butt in a big, big way," he predicted. "We bring in the brightest from around the world for a U.S. MBA education, and they're at the top of the class. While they're up studying late, my U.S. students are doing Jell-O shots in the French Quarter."
Yet, he said, when the immigrant students graduate, "We tell them, 'Sorry, you can't work in the U.S.'"
(Everyone on campus knows the foreign students are at the top, he observed. When his best student, from South Korea, walks around with his tall, beautiful blond girlfriend, "other students say, 'Look, she has a tutor.'")
Though he acknowledges we're in "a soft patch" and that "the turnaround won't happen overnight," his final assessment is encouraging: "2011 will be better than 2010, and 2012 will be better than 2011."
To be sure, his accurate prediction about the end of the recession in 2009 did not also spell the end of economic uncertainty. It hasn't been a smooth recovery, especially for the unemployed. But Ricchiuti's assessments, both comic and economic, left me feeling better.
On one hand, I wish he had a wider audience for his message. Then again, do I really want to face the economic consequences of the majority of Americans believing we're on the right track?
Email Arnie Weissmann at [email protected] and follow him on Twitter.