Analyst Advises Separating Noise from Fact Over the Economy

October 12th, 2020 by Drew Vass, Executive Editor

Speakers for World Millwork Alliance’s (WMA) annual conference last week weren’t bashful about the state of the industry as it struggles through COVID-19, nor did they shy away from tough messages about the economy. But Alex Chausovsky, co-founder of ITR Economics, urged millwork distributors not to overreact or become too fearful, as numerous indicators suggest demand will remain strong for the immediate future.

In an uncertain climate, it is imperative that companies remain data driven in their decision making, Chausovsky said, in order to separate “noise” from fact. “There’s a lot of fear and noise coming at you all day these days,” he warned, adding, “I’m here to tell you with a lot of confidence that this recession will end and there will be growth in the U.S. economy … we’ve already seen the green shoots of a recovery.”

Regarding the progression of the pandemic, when viewed purely from a data perspective there are both encouraging and concerning signals, Chausovsky said. Steady overall decreases across some states are encouraging, but recent increases in Europe, where new cases were averaging around 30,000 per day, he said serves as further warning that the course of the virus remains unpredictable.

“The main takeaway from this is … the virus is sticking around,” he said, “It’s really going to take a vaccine and widespread inoculation before we can put this in our rearview mirrors.”

At the same time, regarding how the pandemic coincides with flu season, “I think some of the fears surrounding this are overblown,” he said. So far, the case count for flu has been very small, he added, which he takes as a positive indicator. Typically, a larger number of cases would already have been reported, he explained, leading him to speculate that mask wearing and social distancing might act to minimize the number of cases, as people aim to prevent the spread of COVID-19. Meanwhile, “It’s not the cases, or the deaths to the flu that will pose the biggest impacts … it’s how we react,” he said.

Even if cases increase for both diseases, indicators suggest that a secondary wave of COVID-19 may not have as severe of economic impacts as the earlier pandemic, he suggested. For instance, as some states reverse or pause reopening due to recent upticks, unlike earlier efforts, they’re doing so in ways that aren’t “shutting down the entire economy,” he explained. For this reason, he believes that the recovery that started in summer will continue through fall, winter and early into next year. To back his predictions, while data analysis by his company forecasted the recession of 2008 as early as in 2006, at the present all micro- and macro-economic indicators are currently in rising trends, Chausovsky said, whereas in 2006-07 they were in decline. For this reason, his company foresees slow but steady economic recovery in 2021. As further evidence, he pointed to data collected for the Housing Market Recovery Index produced by, explaining, “We consider the housing market a canary in the coalmine for the U.S. economy.”

Stimulus packages issued earlier in the year he said played a large factor in housing and the strength of the overall economy. As negotiations stall over additional efforts, he said his firm expects the effects of prior stimulus to last through the fourth quarter of 2020.

Regarding the potential impacts of an upcoming presidential election, Chausovsky said he does not expect the outcome to change his company’s predictions, as past data shows that there is “essentially no difference in economic growth following the election of republican or democratic presidents.” Instead, policy remains the leading indicator for economic change, while taking many years to take effect.

“I don’t want you losing any sleep based on the possible outcomes of the election,” he said. Consumers drive the economy and its recovery, he added. So far, he said, consumers have indicated that they’re willing and able to keep things going.

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