As published in the San Diego Business Journal: January 2, 2012
We have survived a year of stagnation, but 2012 will be characterized by gradual growth. I had expected better numbers over the past year, but I should have known better. This was the big recession — for most of us still active in the workforce — and the big ones necessitate a longer recovery process. While the economic statisticians called the recession “over” a couple of years ago, they apparently were not the ones unemployed. They chose not to talk to the engineers of our economy — the employers — who failed to hire people back. The statisticians must have also failed to talk to the demographers, who, it is certain, would report that part of our economic paralysis and prospects lie in the bipolar age spread throughout our nation: a mass of young people should be entering the workforce but can’t get job traction; coupled with the circumstances of the aging baby boomers. Economists are paying attention to the state of the European Union. Europe matters because its consumers buy U.S. goods. Let’s just assume that Europeans are figuring a way out of their mess. In contrast, ours is a pretty strong economy, and it is gradually recovering. But at the present pace, we are five years away from stabilized prosperity. But we are making progress: Housing prices are down but less than in the four prior years. Home transactions are up 10 percent over last year in San Diego but are still low. The U.S. unemployment level has declined, and jobs are being added at a faster pace. Retail sales are comparatively strong. What does it all mean? It is mush. It is the kind of mush that causes most economists to say that 2012 will be only a little better than 2011. They may be right, but they are playing the risk card close to the vest. To understand the way recovery works is to recognize that we are a species that usually sees the future from the prism of the past. It is just plain hard to take a predictive leap into the unknown. But here is how it often works: consumer spending starts to increase, if for no other reason than people need stuff. Holiday season consumer spending was up, and this is important because consumers account for 70 percent of our national Gross Domestic Product. If the consumer spending has legs which extend into the first quarter of this year, it should catalyze permanent job growth which, in turn, should help loosen the credit markets and start to manifest stabilization and growth in the housing markets. I have a sense that most of us are waiting for a little momentum. Once we see good signs, we will jump in with those additional expenditures and new hiring. Gary H. London is president of The London Group Realty Advisors, which provides real estate consulting and economic analysis.