Recession declared over (can’t you feel it?)
by Karen Brune Mathis
Is it really over?
The National Bureau of Economic Research announced that the recession that started in December 2007 ended as of June 2009.
But does it feel like it?
“We have learned repeatedly over the past 20 years that the end of the recession does not necessarily mark the return to prosperity,” said Mark Vitner, managing director and senior economist of Wells Fargo Securities in Charlotte, N.C.
“If you don’t have a job, it sure won’t feel like it’s over, and I’m not the only one with this sentiment,” said Carol Dole, assistant economics professor at the Jacksonville University Davis College of Business.
“I still think that housing must recover for any measurable improvement in the ordinary person’s perspective. And I think we’ll have to look to exports to trigger employment increases in the short run. I don’t think increases in domestic demand will drive hiring anytime soon,” said Dole.
The economic research bureau, which has been studying and reporting national business cycles since the 1920s, said the recession ended after 18 months, which was two months longer the previous two longest recessions in 1973-75 and 1981-82, at 16 months each.
Jacksonville economist John Godfrey, with Florida Economic Associates, said the bureau reported that the bottom of the recession was reached, and the panel waited until now to state that it was reached “to make sure it doesn’t hit the bottom and drop into another recession.”
“It’s a trough, not a recovery,” he said.
If the economy falls sufficiently again, he said, “it would be classed as an entirely different recession.”
That probably wouldn’t surprise Paul Mason, professor of economics at the University of North Florida Coggin College of Business.
“The recession of December 2007 through June 2009 is over. The next one may have started in July 2010. We will see,” said Mason.
Mason said he won’t know until early next year. “But there is a lot of bad news about jobs, housing and state revenues out there,” he said.
Without federal stimulus money and without more bank lending, small businesses won’t be the economic drivers that they generally were, he said.
Without hiring and economic growth, the economy falters, he said.
“Presently we are being driven by financial market optimism, not factual increases in business sales or consumer confidence,” said Mason.
“If the Congress repeals the Bush tax cuts, and thus raises taxes later this year into next, that will be another negative impetus,” he said.
Lynn Reaser, chief economist of the Fermanian Business and Economic Institute at Point Loma Nazarene University in San Diego, was not surprised at the bureau’s announcement.
“I have believed since late last year that the downturn ended in June 2009. The recession lasted 1 1/2 years, which while severe was a much different picture than the 1930s Depression that lasted nearly four,” said Reaser, who also has been serving as president of the National Association of Business Economics.
“To many people, however, it does not seem like a recovery since the labor market is still very sluggish and unemployment high,” said Reaser.
Technically, growth may have begun in the third quarter last year, but practically, consumers might still be looking for some growth in their own bottom lines.
Here’s a look at some of the statistics in Northeast Florida that consumers see closely:
• Unemployment is rising. The metro area rate rose to 11.7 percent in August and Duval’s rate alone rose to 12.6 percent, according to the state and UNF.
• The number of private jobs in Northeast Florida is steady. The number was 502,400 in August, down from 502,900 in July and up from 502,200 in August 2009.
• Some categories lost jobs. Dropping over the year, August to August, were jobs in construction and manufacturing; finance and insurance; management; and federal jobs, likely because of the end of the temporary Census jobs.
• Some categories gained jobs. Rising over the year were trade, transportation and utilities jobs; retail trade; education and health services; and some leisure and hospitality jobs.
• Targeted jobs are growing. The state predicts that the growth in targeted jobs, defined as high-wage, high-skill jobs, will come in maintenance and repair; customer service representatives; registered nurses; property, real estate and community association managers; medical and health services managers; bookkeeping, accounting and auditing clerks; truck drivers; and other categories.
• Bankruptcy filings are rising. Petitions in the Middle District of Florida are being filed at record rates.
• Commercial vacancies are high. They remain in the 20 percent rate, according to Cushman & Wakefield. As of June, office space downtown was 22.5 percent vacant, led by 26.1 percent on the Northbank. Suburban office vacancy was 23.4 percent, as was the vacancy in the largest market, Butler/Baymeadows.
• Industrial vacancy rates aren’t as high. They ended the quarter at 12.8 percent, with North Jacksonville at 21.8 percent. The largest market, Westside, was 9.2 percent, said Cushman & Wakefield.
• Home sales aren’t strong. The Northeast Florida Association of Realtors said pending house sales in August rose 16.6 percent over August 2009 to 1,632, while closed sales rose 8 percent to 1,316. However, of those closed sales, 49 percent were traditional sales and 51 percent were lender-mediated, or distressed, sales. The report covers Realtor-brokered market activity of single-family residential and condo sales in much of the metro area, but not all.
• House prices are mixed. The median price for traditional sales rose 3.2 percent over the year to almost $175,000, but the lender-mediated median price fell 22.2 percent to $85,535, said NEFAR.
• There’s a foreclosure backlog. The foreclosure backlog in Duval, Clay and Nassau counties was at least 21,523 cases as of midyear, according to The Florida Bar News. More and more homeowners find themselves underwater – the house is worth less than what’s owed on the mortgage.
• The housing supply is ample. NEFAR reports that a market is considered balanced when there is a 5-6 month supply of homes available for purchase. There’s a 10.6-month supply for previously owned homes and 6.7 months for new homes, NEFAR said.
• Housing starts might be inching up after falling since 2005. Single-family starts in Duval, Clay, Nassau and St. Johns counties, according to the Northeast Florida Builders Association, were 3,256 in 2009; 5,111 in 2008; 6,829 in 2007; 11,127 in 2006; and 17,753 in 2005. Based on statistics through August, the annual rate for the area in 2010 is on pace for 3,756 single-family starts, better than 2009 but still far below 2008 and before.
Recessions: A look back
Source: University of Central Florida Institute for Economic Competitiveness
|Recessions|| Peak to trough|
|December 2007-June 2009|| 18 months|
|March-November 2001|| 8 months|
|July 1990-March 1991|| 8 months|
|July 1981-November 1982|| 16 months|
|January-July 1980|| 6 months|
|November 1973-March 1975|| 16 months|
|December 1969-November 1970 ||11 months|
|Historical recessions|| Average peak to trough|
|1854-2001 (32 cycles)|| 17 months|
|1945-2001 (10 cycles)|| 10 months|
|1919-1945 (6 cycles)|| 18 months|
|1854-1919 (16 cycles)|| 22 months|