Chris Thornberg

According to Thornberg, the following sectors of the economy are leading us to recovery:

• professional services
• export services

In addition, Thornberg states that, although the manufacturing sector is not growing, this sector  is “firming up.”

Before I go on to state what Thornberg sees as the sectors that will be the lagging indicators in this recovery, here is what Joel Kotkin, a fellow with the New America Foundation, says about the professional services sector:

Media coverage of America’s best jobs usually focuses on blue-collar sectors, like manufacturing, or elite ones, such as finance or technology. But if you’re seeking high-wage employment, your best bet lies in the massive “business and professional services” sector.

This unsung division of the economy is basically a mirror of any and all productive industry. It includes everything from human resources and administration to technical and scientific positions, as well as accounting, legal and architectural posts.–Joel Kotkin, “Best and Worst Cities for High Paying Jobs,” Forbes

Unfortunately for those of us who live in southern California, Forbes ranks Los Angeles-Long Beach-Glendale as the fourth worst area to find these jobs and the Irvine-Santa Ana-Anaheim area as the seventh worst.

Now for the lagging economic indicators: According to Thornberg, improvement in the following sectors of the economy will not show considerable improvement until sometime after the recovery has begun:

• construction
• finance
• retail

Thornberg, as well as most other economists, sees employment (which is a factor of all of the above mentioned economic sectors) as another lagging indicator. He also states that recovery in each sector will vary from region to region.

Note: For Beacon’s economic forecast, see Beaconomics.

GRAPH COURTESY BEACON ECONOMICS

According to Green, 1.5 million homes can be built and sold in the U.S. annually. However, in the go-go building day of the recent past, 2.2 million homes were being built annually. The inference is that this contributed to the large inventory of homes currently on the market.

Green’s conclusion is that the current reduced level of construction will eventually help to reduce the number of homes on the market. His reasoning is that, since the population will continue to grow and current homes will get older and deteriorate, this will help us to return to a more stable housing market. As he stated on AirTalk , this will help recovery return “sooner rather than later.”

The Orange County Register’s Jonathan Lansner had some related information that is relevant for Orange County. The information is from a recent jobs report from the California Employment Development Department. According to the EDD report, construction jobs in Orange County are down 29% from the peak in May 2002. This translates into a loss of 32,200 Orange County construction jobs. (California’s number is 33% fewer construction jobs than were present at the peak.)

These numbers suggest that reduced housing construction in Orange County will help to deplete the supply of housing that was built up in the boom years and aid a return to a stable housing market. I hope that this mean no more extreme highs or lows—rather a steady state of construction.

However, until we get to that steady state, more pain is in store. A recovery “sooner rather than later,” although necessary, doesn’t mean painless.

“In Orange County, homebuilding dropped to the lowest level in figures dating back to 1946, amounting to a $1.8 billion drop in the industry’s contribution to the local economy, according to estimates.”
—Jonathan Lansner, “More homebuilding cuts seen in 2009″

PHOTO COURTESY THE BUILDING ASSOCIATION OF SOUTHERN CALIFORNIA