Economy: Government Stimulus to Boost Economy; Recovery Remains Unclear
The resiliency demonstrated by the U.S. economy through the first half of 2008, particularly below-trend job losses, turned into a serious recession as the downturn escalated into a global financial crisis. Elevated job reductions are likely to dominate headlines for several months, with total losses considerably higher than during the dot-com bust and 9/11 tragedies.…
The resiliency demonstrated by the U.S. economy through the first half of 2008, particularly below-trend job losses, turned into a serious recession as the downturn escalated into a global financial crisis. Elevated job reductions are likely to dominate headlines for several months, with total losses considerably higher than during the dot-com bust and 9/11 tragedies. Similar to other periods of shock, concerns regarding additional risk — from falling consumption to the uncertain impact of the auto industry troubles — dominate the general economic psyche.
Clearly, there are reasons for concern; however, a number of factors should also be considered that could mitigate the depth of the recession, barring exceptional surprises. Domestic payrolls entered the downturn lean, having grown at the slowest rate of any expansion period since 1954. Government intervention, while choppy and uncertain in some respects, has become unprecedented in the United States and abroad and will likely be expanded with another sizable stimulus package this year. Confidence is yet to be restored, and the financial system is a long way from operating normally, but early signs point to a gradual improvement. Significant residential foreclosures and high for-sale inventories have driven home prices down by an average of 18 percent nationally and as much as 35 percent in some markets, sparking a modest rise in sales activity. A bottoming of the housing sector by midyear, as expected in most metro areas, and improving credit markets should begin to stabilize the economy and set the stage for a recovery beginning in 2010.
Hessam Nadji is Managing Director of Research Services for Marcus & Millichap Real Estate Investment Services Inc.
For more information, please contact Hessam Nadji at (925) 953-1700 or [email protected].
