U.S Industrial Markets Are Poised for Long-Term Growth The Great Capital Strike of 2008 will cause short-term fluctuations, but major U.S. industrial markets are on solid ground.
Perhaps we are wrong, but we do not believe we are in a recession. Real GDP grew by 2.7% in 2007, though the fourth quarter was much slower. We believe the first quarter’s annualized growth rate was 0.9%, although year-over-year growth will be closer to 2%, as we predict that GDP growth will modestly improve through the second and third quarters. The modest job losses in January and February do not reflect systematic reductions, but rather the fact that employee attrition is not fully replaced. Our airports, hotels, conferences and restaurants are too full for the U.S. to be in a recession.
What we are experiencing is a capital strike. Beginning in the mid-January 2008, consumers and businesses collectively decided to “sit on their hands,” choosing not to do anything for the next few months until conditions become clearer (for better or worse). This is what has brought economic growth to a grinding halt. We are not moving forward or backwards; we are just sitting dead in the water.
As a result, the economic plateau we foresaw for 2009 seems to be taking place now. Interest rate cuts and aggressive government spending will probably see us through 2008. We still anticipate 2% real growth and 1 million new jobs in 2008. But if this growth occurs, we still foresee a recession in 2009 as political uncertainty takes hold. But we may be wrong, and the recession of 2009 may have arrived six to nine months early. There are regions (especially Ohio and Michigan) and sectors (housing, construction and financial services) that are clearly in a serious recession.
But there also are regions (the Mountains, the Northwest and Texas) and sectors (healthcare and travel/leisure) that are doing quite well. Thus, depending on where you live and what you do, these are either the better of times (for even those regions and sectors doing well have had even better times in recent years) or the recent worst of times. Based on the Household Survey, the U.S.....
Prepared By Dr. Peter Linneman, PhD Chief Economist, NAI Global Principal, Linneman Associates Issued by NAI Global www.naiglobal.com / Published to the Site www.naibaltics.com by NAI Baltics – commercial real estate services in the Latvia, Lithuania, Estonia. Your trustworthy partner, advisor and consultant in the Baltics and Worldwide. http://www.naibaltics.com