The Recession is Ending, So Can Job Growth Be Far Behind?
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It used to be that certain states were considered by economists as bellweather indicators of trends to come. Since the recession has been so wide spread across the nation, the usual platitudes, "so goes California or so goes Atlanta, so goes the country" don't have the same meaning. In the past, trends that became meaningful in California, like transit oriented development, housing density and age restricted housing ultimately spread across the U.S. and became part of the fabric of U.S. commercial development. In other instances, there has been the consideration that at one point, perhaps not as true now, Atlanta was a good proxy or model of the country's economic activity because of the balance of employment, industrial base and position as a financial powerhouse in the emerging "new south."
What I think is a better way of understanding job growth is to look at the sectors that will show gains first and then check to see if the local property markets are responding. So, as Warner Wolf (WCBS-NY) used to say, let's go to the videotape:
Using the Tallis Index, provided by Pierce-Eislen (www.pi-ei.com) we're going to take a look at Urban Atlanta first, and then a few other places next. Pierce-Eislen developed the Tallis index as a sophisticated way of helping to understand how a market is performing, relative to its theoretical equilibrium. Not only is the index calculated on a monthly basis, something virtually no other firm has been able to do in all of my years in research, but it's a very comprehensive look at market conditions including such important measures as job growth, rental rate change, apartments under construction, single family housing affordability, concessions participation and the relative availability of home mortgages for a median priced home by a median income borrower.
In examining Urban Atlanta, the index tells us that on a month over month period, there has been improvement February to March. While it's early to be sure, the positive change in market conditions is most likely a meaningful early indication of what we will see in urban Atlanta as the year progresses, another sign, we believe of the recession abating and the market turning around.
Suburban Atlanta, by comparison, shows an even more pronounced uptick in market conditions, again suggesting that commercial property fundamentals, while still below trend, are headed back towards owners returning to pricing power.
By comparison, Seattle, written off by a large number of institutional owners and acquirers is headed back towards a more positive result, with its 3 month moving average moderating and the one month change, from February to March showing positive gains.
Remember, these indicators are composites and are showing strength where the conventional wisdom and the trade press has all but run screaming in the other direction.
I had forecasted at ULI in Miami late last year that I thought the recession was going to end, and be followed by a jobless recovery for a while with house prices bottoming out by September, 2009. To be honest, a lot of people in the audience laughed, potentially because of the obvious nervousness in the room, but mostly because of a fear that this recession was here to stay. Now that the Pierce-Eislen Tallis Index is presenting a very compelling case for the recession easing, I wonder who's laughing now.
We're going to be featuring more data and analysis using this tool in future columns. I hope you'll come back to see what we have to share with you.