LOS ANGELES-“Uncertainty has been a key characteristic of the business environment in the first half of 2012. It has caused businesses to hold back on hiring and has been a major factor causing job growth and the overall economy to slow in the second quarter.” So says Ken McCarthy, senior economist and senior managing director of research at Cushman & Wakefield. McCarthy recently chatted with GlobeSt.com about the subject of recent GlobeSt.com poll, which asked the audience to identify the biggest threat to their businesses.
The majority of the respondents of the poll picked “the overall economy” as their main threat at 46%. Other options included Europe (10%); Jobs (17%); Stalemate Inside the Beltway (10%); What Might Happen After the Election (12%); and “Not a Thing. Happy as a Clam (6%).” Alan Clifton, VP of strategic investments at Passco Cos. LLC, says the average American is very confused by conflicting reports on where the economy is and where it’s going.
“The average American’s reality is that they don’t trust the government and they, or a family member or friend, has lost their job which magnifies their fear for their job,” he says. “Due to this ‘paralysis by analysis,’ it is safer to save than spend, which is also mirrored by most of the Fortune 500 companies as their balances sheets’ cash holdings reflect.”
Marcelo Bermudez, president of Figueroa Capital Group Inc., agrees with the reader’s poll pick. “If we were to add 300,000 jobs a month, it would still take three years to get back to the previous employment peak. We added about 80,000 jobs in June 2012; a far cry from where we need to be,” he tells GlobeSt.com. “Fortunately, we will not see any meaningful inflation until we hit 7% unemployment. Since this is political hunting season, either presidential candidate will use these numbers to their advantage, with one saying the other is doing a terrible job and the other saying things are not as bad as they seem.”
Everybody, including President Obama, has ideas on how to jump start the economy including ending tax cuts for the ultra-wealthy, adds Bermudez. “While it would add about $56 billion to federal coffers, it isn’t very significant since it represents only about 1% of all monies spent by the government. Small business owners, often called the backbone of the economy, don’t really create jobs other than for themselves.”
He adds that 90% of all small businesses only represent 20% of all jobs. “We need a ‘new, new thing’ to jump start the economy and it will to have a global patina to it.”
And according to Michael Frankel, principal of Rexford Industrial, the audience response is because most people use “a short-term vision as opposed to looking to the longer-term and underlying root causes.” With a longer-term view, he says, “it seems the stalemate inside the Beltway, which I would more appropriately describe as lack of accountability in Washington, represents the gravest threat to our business and to our country.”
American firms do business in the 27 European Union nations, manufacturing goods for export there and moving exports and imports through US ports. In fact, more than 18% of US exports last year went to Europe, explains Alan Levy, chairman of Tishman International Cos. “Imports also are important to US interests.” For example, he says, Bulgaria is the largest producer of rose petals used to make perfume. “Therefore, a European financial crisis diminishes profits and jobs stateside, particularly in the manufacturing and transportation industries.”
The bailout of Greece and Spain is also a major concern, Levy adds, because financial failure of any of the 14 Eurozone members could weaken the euro currency. “If the euro falls, it creates a value imbalance between the dollar and euro, resulting in imports and exports being more or less expensive. This creates uncertainty for international investors, who will pull out of Europe when the risk gets too high.”
According to McCarthy, “Until there is more clarity on the political environment, the tax environment and financial conditions in Europe, businesses in the US are likely to remain cautious.” He tells GlobeSt.com that “for the real estate industry, job growth is the most important driver of demand. When employment begins to rise more rapidly, markets will become more robust.”
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
