Guam's economic boom?

Regardless of how you feel about Guam's military build-up, it could not have come at a better time.

The economic situation on the mainland is going from bad to grim, it seems.

Although it's not official, the recession is apparent. Housing prices in some areas are already half of what they were two years ago. That's mostly in areas outside the main cities. Unemployment is rising. Everybody I know is nervous and cutting back.

To just see how bad housing is, check out the "Top Discounts" list to the right on the Northern Virginia Housing Bubble Fallout blog. Most of those communities are at least an hour from downtown DC, and most vulnerable.

In contrast, Guam is about to get a $15 billion investment in new military-related construction as a result of the build-up. This will create a lot of jobs and demand for services.

This is an island of only 176,000 people. When the build-up is completed, the island's population may well be over 200,000 -- a very large jump. Some 8,000 Marines and 10,000 dependents are expected and there will certainly be large numbers of civilian workers added as well.

This build-up will certainly help Guam's unemployment rate, which was at 6% in May up from 5% the same period last year, from 6,863 to 8,487 workers.

With all these new people, I don't think Guam's housing prices will tumble like the mainland and it should be easier to find jobs in everything from construction to restaurants.

The negative may be an investor driven push on housing prices that may push those prices well above incomes. This could put housing increasingly out-of-reach for young people, prompting some to leave for the mainland for more affordable housing, assuming they can find a job. It’s already difficult for Guam to hold on to its young men and women, and it would be ironic if a boom makes it even more difficult.

Regardless, Guam should be relatively insulated from the impact of the downturn. The build-up is a huge economic stimulus. Assuming my math isn’t seriously messed up, the U.S. will spend approximately $85,000 for every man, woman and child living on Guam as a result of the build-up. That's a a lot better than the $600 economic stimulus check. That’s going to have a huge impact. But everything has its downside. The housing bubble created a lot of wealth for people who knew when to buy and when to sell. Most didn't, apparently. The long-term affect of the military build-up on the culture, environment and the cost of living on Guam, is another question all together.