2012 Global Market report - NAI Global

US Overview
The US is well over two years into the most anemic recovery in post-WW II history, and
the recovery continues to weaken. Everyone, including bearish forecasters, has been
shocked by the weakness of the recovery to date. After a burst of growth surrounding
the November 2010 elections, weakness returned as the fundamental collapse of stable
and predictable rules for the economy resumed. It became clear within a few months
after the November 2010 elections that politicians of both parties were more interested
in rhetoric than predictability. As government shutdowns and defaults were threatened
by leaders of both parties, unpredictability soared. Meanwhile, the Obama administration
issued new regulations and interventions in the belief that bureaucrats, not entrepreneurs,
create growth.
Absent leadership in any branch of government, this malaise will continue. We recall that
20 to 25 years ago, many in the US wanted to become more like Japan; sadly, we have
succeeded and have the anemic economic growth to prove it. In the meantime, our growth
is largely dragged forward by population growth rather than entrepreneurial activity.
There is some good news in the economy. Real GDP, though far below historic trends,
has risen to new heights and is growing about 1.5% annually. However, this means that
two thirds of economic growth is driven by population growth and only one third via
productivity growth.
Total payroll employment peaked in January 2008 at nearly 138 million jobs, bottoming
two years later at 8.75 million fewer jobs. We have regained 2.3 million jobs through
October 2011, or only about 25% of the 8.8 million jobs lost during the recession. Only
the major MSAs of Texas have essentially regained all of their lost jobs, while most
markets have regained less than 20% of their job losses. As a result, most markets have
achieved only about one third of the job recovery anticipated by even pessimistic
forecasters. The job gains which have occurred have been primarily concentrated among
well educated, older adults. Meanwhile the recession continues largely unabated among
the young and poor educated.
After peaking in October 2009 at 10.1%, the US unemployment rate declined to 8.8%
in March 2011, but stood at 9% in October 2011 as population growth driven labor force
expansion surpassed job formation. The median unemployment duration stands at 20.8
weeks, a decline from the 25.5 week high in June 2010, but still significantly higher than
the 8.4 weeks seen in 2007-2008. The percent unemployed 27 weeks or more edged
down over the last quarter, and stood at 42.3 % in October 2011 — significantly higher
than the low of 17.3% in December 2007, but on par with the 45.8% high in June 2010.
At the same time, short-term (five weeks or less) unemployment spells account for 19.4%
of the unemployed, compared to 37% at the beginning of the recession.
The “marginally attached” labor force stood at 2.6 million in October, about the same as
one year earlier. The Bureau of Labor Statistics defines the “marginally attached” as
individuals who are not part of the labor force, but wanted work and were available for
work, having looked for a job in the last 12 months, but not in the last four weeks.
Due to the absence of a stable political environment, we have dramatically lowered our
forecasts to 1.6 million jobs in 2011, 1.8 million in 2012, and 2.9 million in 2013, well
below the 3-3.5 million a year which would otherwise occur. The estimate of 2.9 million
2012 Global Market Report n www.naiglobal.com
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