WASHINGTON, DC--Jones Lang LaSalle Research Analyst Justine Morrison (photo top left) says fourth quarter 2007 growth was weaker than expected.Morrison's findings show the U.S. economy showed signs of slowing in the fourth quarter as GDP grew by an anemic 0.6%. It appears that the effects of the credit crunch and turmoil in the financial markets have begun to have wide-spread reverberations across many industries. Though analysts had been predicting a sharp decline in GDP this quarter, actual GDP growth was just half of the 1.2% consensus. For the year, the U.S. economy grew by 2.2%, the lowest growth level in five years.
Consumer spending, which makes up about 70 percent of GDP, grew by 2.0% in the fourth quarter compared to 2.8% growth in the previous quarter. In light of the GDP results and various other indicators, the odds of recession are now 50-50, if not leaning slightly towards a contraction. While some analysts believe that we have already entered a recession, more optimistic prognosticators believe that the economy could skirt a recession but be faced with very slow growth at least through the first half of 2008.
Hiring Showing Signs of Softness
Employment growth slowed in the last half of 2007 and the U.S. unemployment rate crept up from the mid-four percent range to 4.9% in January. That said recent reports of outright declines in the U.S. labor market may be causing a premature panic. It will take a few more months of sub par results to definitely know whether this was the start of a contraction.
Though it does not appear that many companies have commenced layoffs, it is clear the pace of hiring slowed during the second half of 2007 with average monthly employment gains at half the level they had been in 2006. The consensus at this time is that the unemployment rate will continue to rise in the first half of 2008 and plateau somewhere near 5.5% depending on the state of the overall economy.
Weak Outlook for the First Half of 2008
It appears that the national economy is headed towards very slow growth at best and possibly a modest contraction during the first half of 2008. Government intervention should go a long way towards cushioning the effects of a sluggish economy over the first half of the year.
However, this will take time and a return to health may not come until the end of 2008 or early 2009. Historically speaking, corporate balance sheets and profits are in very good shape with the exception of companies in housing-related and financial services sectors. This coupled with the government’s recent, aggressive actions should go a long way to making a contraction, if it should come, a short-lived one.
For a more detailed report and other outlooks on the real estate industry, please contact:
John Sikaitis
Corporate Communications
Justine Morrison
Research Analyst
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