Labor shortages, falling house prices, corporate hiccups – oh, and maybe war with Iran. Speaking at Altair Advisers’ half-yearly Investment Forum in Chicago last week, economist David Hale warned of hard times ahead for the U.S. economy, including a business slowdown in 2007 and a significant labor shortage starting in 2010.

Hale labels the threat of a Middle East military conflagration centered on Iran as the main point of uncertainty facing the industrialized world in 2007, and says that private intelligence estimates of the result of such a conflict for the U.S. and world economies are more pessimistic than the public ones.

Other possible outcomes for next year include a worldwide cash shortage, a backlash against globalization, and a “pronounced softening of the domestic housing market” triggering a consumer slowdown in the U.S.

As an early indication of these emerging scenarios, Hale says we should look for the U.S. equities market to hit an ugly patch in the fourth quarter of this year. But he adds that strength in Asia – the combined effects the Chinese boom and Japan’s recovery – will spur continued heavy inflow of institutional capital into commodities, pushing many prices higher.

Paul Laudicina, global strategist for management consultancy A.T. Kearney and another speaker at Altair’s forum, backed Hale’s views. Laudicina envisages a labor shortfall of between six million and eight million workers by the end of this decade, swelling to 35 million in the next. “We're at a strategic crossroads that you only see perhaps twice a century,” says Laudicina. The dangers we face now are a result of “demographic trends and natural resource constraints” combining “to inhibit business growth.”

Four-year-old investment consultancy Altair advises wealthy individuals and families and foundations on combined assets of about $2 billion. –FWR

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