Good News Friday - September 18, 2009

Ben & Sam

Federal Reserve Chairman Ben Bernanke said this week that the recession is “very likely over.” (Whew!) But we’re not out of the woods yet. Chairman Bernanke went on to say that “it is still going to feel like a very weak economy for some time as many people still find their job security and their employment status is not what they wish it was." It will take several years for employers to replace the 7 million payroll jobs lost since the recession began, but there are reasons to believe that the labor market recovery will get underway more quickly than the jobless recoveries following the last two recessions:

• Labor productivity is surging, suggesting that there is little slack left in the labor force. As final demand begins to rise, employers may need to begin hiring sooner than expected.
• The manufacturing sector is growing as new orders handily outpace depleted inventory levels.
• The global economy is expanding, led by China and other developing markets. Coupled with the weak dollar, this means that American exporters will see some opportunities.
• The American Recovery and Reinvestment Act, popularly known as “the stimulus,” has been criticized for not getting the money out the door fast enough. Yet the fact that only a fraction of the $792 billion has been spent means that the remainder will be available to juice the recovery. (Click here to view the Pro Publica Web site showing the progress made in dispersing the stimulus.)

For an industry short of credit, there is a lot of capital gathering on the sidelines to invest in commercial real estate. The China Investment Corporation (CIC), China’s $300 billion sovereign wealth fund, is the latest group to be reported looking at major investments in U.S. commercial real estate. Sam Zell, known for timing real estate cycles just right, is seeking to raise $625 million to buy distressed securities backed by assets including commercial real estate.

Have a great weekend.

Robert Bach
SVP, Chief Economist
Grubb & Ellis
312.698.6754