Doug Marshall
Market Assessment
Published July 22, 2009
Signs of economic improvements, at the moment, are small but persistent: dire economic collapse is no longer a worry; the contraction of real GDP growth is slowing; the pace of job losses is lessening…
The question now is whether we’re near the bottom of this economic downturn, or if there’s more on the horizon – another proverbial shoe dropping and catching the global economy off guard.
For some perspective on the current economic recession, Baron’s June 12th Chart of the Day illustrates the duration of all US recessions since 1900.
As the chart illustrates, the five longest recessions all began prior to 1930. The length of the current recession (now in its 20th month) is above average and the longest recession since the Great Depression.
Market Assessment
Published July 22, 2009
Signs of economic improvements, at the moment, are small but persistent: dire economic collapse is no longer a worry; the contraction of real GDP growth is slowing; the pace of job losses is lessening…The question now is whether we’re near the bottom of this economic downturn, or if there’s more on the horizon – another proverbial shoe dropping and catching the global economy off guard.
For some perspective on the current economic recession, Baron’s June 12th Chart of the Day illustrates the duration of all US recessions since 1900.
As the chart illustrates, the five longest recessions all began prior to 1930. The length of the current recession (now in its 20th month) is above average and the longest recession since the Great Depression.
According to Nouriel Roubini and the RGE Global Monitor, this recession, the longest and most severe of the post-War period, produced an immediate contraction in consumer confidence and economic activity. Basically, growth came to a grinding halt and then slammed into reverse.But, while that contraction is showing signs of slowing, there are many economic indicators that are not improving fast enough to declare this recession as coming to a close.
Unemployment, industrial production, real manufacturing, wholesale retail trade sales, and real personal income are indicators that are still seen as continuing in decline.
Therefore, “RGE Global Monitor does not yet see signs of a strong and sustainable recovery.” They predict that “real GDP will stop contracting at the end of 2009, but it is likely that many of these indicators will not bottom out before mid-2010.”So how does this slow economic recovery affect us in the commercial real estate market? Unfortunately, it has a direct, adverse impact on the health of our industry.
Without new jobs being added into the marketplace rental rates can’t rise, vacancy rates can’t fall and property values can’t increase.
An increase in employment must precede a rebound in commercial real estate. Let’s hope that the experts are wrong as a jobless recovery would have long-term undesirable consequences for all of us.
Sources:
Wall Street Journal, July 11, 2009, Nouriel Roubini: Still Gloomy, But Sees Pace of Contraction Slowing
Barron’s Chart of the Day, June 12th.
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