Gaucher became a last minute replacement for scheduled speaker Moody's chief economist Mark Zandi, whose absence highlighted the state of the market's importance, as he had been called by Sen. Chris Dodd to testitify down in Washington, DC on the economy as recently as this morning.
By Moody's estimation, Gaucher put the recession--which weighs on every person in the US--at a mere 20 months, ranging from December of 2007 to the aforementioned end date. During this short tenure, however there were some noticeably harsher trends than most recessions. Peak to trough was 4% of real [Gross Domestic Product], Gaucher explained. This is twice as much as the typical post-World War II average. There was also a 6.2% payroll loss and unemployment jumped from 4.4% during the recession to--what Moody's is predicting will be--the apex of 10.2% in the latter part of 2010.
Notably, this recession, as opposed to those that came before it, was broad in nature, Gaucher explained. Its effects were registered cross-industry and in geographically diverse areas of the US. North Texas and north through the Midwest states have begun to turn around first, since there was a smaller housing boom and their economies are more "heavily tied to commodity prices" which held up well throughout the downturn, Gaucher noted.
This turnaround is slowly spreading, Moody's numbers indicate, inching into Michigan as the auto companies see a resurgence and the Northeast, while moving a bit more slowly into the West. Las Vegas, however, unlike the rest of the country, is still officially in a recession as conditions have not begun to moderate. The overbuilding of condos and the housing market, combined with a consumer economy are the negative drivers for that area, Gaucher explained. Arizona and Florida are slower than most of country as well, due to overbuilding, but will begin turning around soon, Moody's predicts.
Much of the turnaround can be linked directly to the government's stabilization of the banking system, Gaucher explained, along with their aggressive moves and the Federal stimulus package, it contributed an estimated two percentage point growth to GDP. However, he noted, this impact will lessen over time and eventually become a drag on growth by the end of 2010 after, its initial boost.
And the largest problem Gaucher sees, much like everyone else, is that job creation will be an impediment to growth. Adjusting for the census and the winter storms, the country is adding roughly 50,000 jobs per month, Gaucher explained, which is good but not great. Moody's is foreseeing a move towards growth this year, but estimates that the county will need to generate 125,000 jobs per month simply to cover new entrants into the labor force; college/high school grads, etc. This does not account for the currently unemployed.
To that point, unemployment will see a slight uptick as the economy becomes healthier, a technicality of the tracking system. Since unemployment only tracks those that are seeking work, as the economy improves, more of uncounted unemployed will re-enter the search market and bump the unemployment figure, despite a recovering market.
Finally, Gaucher sees education and healthcare as strong tenant drivers coming onto the market as they have both seen recent growth. The healthcare sector seems particularly bright considering the passage of the much ballyhooed and divisive healthcare bill, as well as the advent of an aging boomer generation creating higher demand.
Professional business services, "businesses that serve other businesses," will also see large job gains in the short term, he predicted, while financial services will continue to languish. Finally, in response to the big question of the day, Gaucher nodded emphatically during the Q&A session, affirming, "Banks will come back."
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