by Calculated Risk on 6/14/2009 03:40:00 PM

Here is an interesting short discussion on reusing mall space from Rob Walker in the NY Times Magazine: Repurpose-Driven Life

Talk of American infrastructure tends to focus on inadequacies: roads that need to be repaired or widened, bridges fortified, electrical grids updated. All the more striking, then, that America’s retail infrastructure — its malls, supercenters, big boxes and other styles of store-clumping — has come to be characterized by rampant abundance. This has been a decades-long trend. But it has taken the economic downturn, with chain stores liquidating, mall tenancy slipping and car dealerships scheduled for closure, to focus popular attention on the problem with our retail infrastructure: there is too much of it.

A recent book, “Retrofitting Suburbia,” by Ellen Dunham-Jones and June Williamson, notes that in 1986, the United States had about 15 square feet of retail space per person in shopping centers. That was already a world-leading figure, but by 2003 it had increased by a third, to 20 square feet. The next countries on the list are Canada (13 square feet per person) and Australia (6.5 square feet); the highest figure in Europe is in Sweden, with 3 square feet per person.

And that was in 2003 - before the most recent mall building boom began (see graph at bottom).

From Italian cartoonist Giovanni Fontana (used with permission). Here is his website, the vignettist's corner Click on cartoon for larger image in new window.

Of course the housing bubble in the U.S. was much large than the mall bubble.

In 2005, investment in single-family structures hit a peak of $481 billion (all residential investment including multi-family and home improvement was $761 billion in 2005.)

Investment in malls peaked at $32.5 billion in 2007. So the mall bubble isn't anywhere near as big as the housing bubble in absolute numbers or potential negative impact on the overall economy.

Here is a graph of mall investment through Q1 2009 as a percent of GDP based on data from the BEA ...

Investment in multimerchandise shopping structures (malls) peaked in Q4 2007 and is continuing to decline.

Note that the article above stated there were 20 square feet of retail space per person in shopping centers in 2003 - and that was before the more recent building boom. There is just too much retail space in the U.S.

by Calculated Risk on 6/14/2009 02:17:00 PM

Way back in 2005 I stated the obvious:

"Of all the areas experiencing a housing boom, the areas most at risk have had the greatest increase in real estate related jobs. These jobs include home construction, real estate agents, mortgage brokers, inspectors and more.
...
Not surprisingly, California has become more dependent on construction than the rest of the country, and construction has really boomed in San Diego. But San Diego has nothing on the Inland Empire.

I believe that areas like the Inland Empire will suffer the most when housing activity slows."

To update the graphs:

Click on graph for larger image in new window.

This graph (using Not Seasonally Adjusted data) shows construction as a percent of total employment for the Inland Empire, California and the U.S.

Although there was a surge in construction employment in the U.S., and about a 50% increase in California (as a percent of total employment), construction employment doubled (as a percent of total employment) in the Inland Empire.

Now construction employment in the Inland Empire - as a percent of total employment - is getting close to the lows of the early '90s.

The second graph shows the percent of construction employment and the unemployment rate for the Inland Empire.

With the housing bust, the percent construction employment has declined sharply and the unemployment rate has risen to around 13% (about the same as Detroit).

by Calculated Risk on 6/14/2009 09:37:00 AM

From The Observer: Paul Krugman's fear for lost decade (ht Jonathan)

A few excerpts:

Krugman: The risk of a full, all-out Great Depression - utter collapse of everything - has receded a lot in the past few months. But this first year of crisis has been far worse than anything that happened in Japan during the last decade, so in some sense we already have much worse than anything the Japanese went through. The risk for long stagnation is really high.

And on the stimulus:

Will Hutton: [I]s Obama doing enough on fiscal policy?

PK: Well we have a stimulus which is a little over 5% of one year's GDP but some of it is not real - something that was going to happen anyway and not very stimulative. So it's really about 4% of GDP of genuine stimulus, but spread over two and a half years. So, it's actually quite a lot less than what I was arguing for.

WH: So, will it be sufficient?

PK: Well, sufficient to actually restore full employment would probably have to be 5% or more. More than we have would certainly be a good thing. It actually might happen. You know, the buzz I'm getting is that a second-round stimulus might well come on the agenda.

by Calculated Risk on 6/13/2009 08:31:00 PM

Earlier I posted that Fitch expects "home prices will fall an additional 12.5% nationally and 36% in California" from Q1 2009.

Here is Eric's take ...

From cartoonist Eric G. Lewis. Click on cartoon for larger image in new window.

by Calculated Risk on 6/13/2009 06:03:00 PM

From Reuters: Geithner: It's Too Soon To Withdraw Economic Stimulus

US Treasury Secretary Timothy Geithner said on Saturday it was too early to start withdrawing stimulus for the world's top economies, but governments should pledge a return to more sustainable fiscal policies in the future.

"Growth should remain the principal focus of policy among the G8 and broader G20 economies," Geithner told a news conference ... He said recovery has not yet arrived, and governments need to keep reinforcing recent improvements in global demand.

"It is too early to shift toward policy restraint," Geithner said
...
Geithner said the "force of the economic storm is receding" he told the BBC in Lecce that he wanted recovery firmly in place before withdrawing stimulus.

"We don't have a world economy that's growing anywhere close to potential yet. We want to see recovery firmly established before we start to get on to the next challenge," he said in the interview.

From NY Times: At Talks, Geithner Defends Stimulus

“Where we have seen improvements, they are the result of the unprecedented scope and intensity of policy actions to support demand and financial repair,” Mr. Geithner said in a statement. “These early signs of improvement are encouraging, but the global economy is still operating well below potential, and we still face acute challenges.”
emphasis added

Despite the "unprecedented scope and intensity of policy actions", the global economy (and U.S. economy) are still in recession, and the so-called "improvements" are that the pace of contraction has slowed. We still have a ways to go.