Is the Economic Recovery Running Out of Steam?
Nationwide, the economic recovery looks more fragile than it did just a few months ago. GDP is growing at a moderate pace but not nearly as rapidly as at the end of last year. Almost no private sector jobs were created in May. The unemployment rate dipped from 9.9 percent in April to 9.7 percent in May, but mostly because fewer people were looking for work. Nearly half the unemployed in May were out of work for more than six months. Housing markets weakened, and the expiration of the federal homebuyer tax credits at the end of April could mean further weakness later in the year.
As our latest MetroMonitor shows, things don’t look much better when you drill down from the national economy to America’s 100 largest metropolitan economies. All 100 of those economies saw their output grow in the first quarter of this year, but in 90 of them the pace of growth was slower than in the previous quarter. Only 32 of them had recovered their pre-recession output levels. Meanwhile, only 36 had any job growth in the first quarter and none had recovered its pre-recession employment level. House prices were down in all 100 metro areas from their levels in the first quarters of 2007 and 2009. Foreclosures were up during the first quarter in all but 16 of the nation’s large metro areas.
In some unlikely places, though, there’s at least a small light at the end of the tunnel. The metro areas in California, Florida, Nevada, and Arizona that had the biggest house-price run-ups earlier in the decade--and that suffered the biggest housing market crashes more recently--have been among the places that the recession pummeled hardest. In the first quarter of this year, some of these metro areas showed flickers of recovery:
•Bradenton, Cape Coral, Jacksonville, Modesto, Los Angeles, Riverside, and San Jose saw their first job growth since the beginning of the recession.
•Stockton had job growth for the third quarter in a row.Although house prices continued to fall, their pace of decline slowed in Bakersfield, Cape Coral, Fresno, Las Vegas, Los Angeles, Miami, Modesto, Oxnard, Riverside, San Diego, San Francisco, San Jose, and Stockton.
•Foreclosures fell in Bakersfield, Las Vegas, Los Angeles, Modesto, Oxnard, Riverside, San Diego, San Francisco, San Jose, and Stockton.
One quarter’s worth of data doesn’t make a trend, so it’s impossible to say whether the light at the end of the tunnel in these metro areas portends a return to sunny economic skies or just a brief glimmer before the clouds return. Over the long term, my guess is that the housing-bubble metro areas whose phenomenal pre-recession growth was based on retirement and tourism will eventually return to rapid growth. But the pace of growth won’t be as torrid as it was before the recession. Once the economic recovery has sunk firmer roots nationwide, retirements and vacations will resume, though not at the pace of the last half century, and places like Las Vegas and Miami will benefit. Until then, these metro areas will have their economic ups and downs from quarter to quarter. Keep your eye on the data.