Grubb's Robert Bach

THE “R” Word–YES OR NO?

For such a notably optimistic industry, last week’s Quick Poll drew some pretty dour and dire responses. Some 63% of our polltakers said to expect a recession while only 37% said we’d miss it. Commentator Robert Bach, SVP and chief economist for Grubb & Ellis, has in recent weeks, frankly given a bit more ground to the probability of a recession–but not so much that he’s willing, as he says, to throw in the towel. Here’s why:

“The results don’t surprise me, but if you had taken that poll two weeks ago, it would have been 50/50 and three weeks ago it would have been 40% thinking there was a recession. There’s been a significant deterioration in sentiment–not just our industry but across the economy–just since the first of the year. There’s been a steady drumbeat in the news and a constant stream of stories about it. I don’t blame the media but it’s the topic at the top of everyone’s list now. And because of the constant exposure, it seeps into everyone’s mindset.

“The rule of thumb for a recession is two quarters of declining GDP, but the way the business cycle is tracked takes into account employment, income, industrial production and sales. Well, sales and production are kind of flat, but employment and income are perking along. The December employment numbers weren’t good but it’s possible that the January numbers could be stronger.

“I had the honor of moderating a panel that interviewed Alan Greenspan at our national meeting, and that was the first question we asked. He’s been saying for a while that the chances are 50/50. But he stated that the economy is at stall speed, meaning that the economic immune system has been compromised and it won’t take much to tip us over into a recession.

“Goldman Sachs has come out and said they think there’s going to be a recession. Merrill Lynch says they already think there’s a recession, and the parade of analysts who have thrown in the towel is lengthening.

“At the end of the day, who am I to contradict Greenspan? In our forecast book I think we said there’s a 40% to 50% chance of a recession. For the longest time I was telling people it was 49.9%.

“I think now it’s more than 50/50–but maybe only a 50% to 55% chance. It’s been said that economists have predicted nine of the last five recessions. There’s a chance that this could be the 10th. But I’m not ready to throw in the towel.”