Companies have the money to forestall the worst
At the commercial real estate firm Jones Lang LaSalle, an otherwise upbeat meeting about a new lease deal was interrupted Thursday afternoon with word of a sharp decline in the stock market.
The firm’s client held aloft his BlackBerry to show the others in the conference room that the Dow Jones industrial average was already well on its way to a 513-point loss, its worst single-day decline in two years. Still, the meeting ended on a positive note: The new lease would mean a boost in income at the client’s downtown Boston office building, something the shaky stock market couldn’t touch.
“The decline made everyone stop for a second, but people have become more confident that one bad day doesn’t mean that you’re going to have a month of bad days,’’ said David Slye, executive managing director of Jones Lang LaSalle in Boston. “I think we’re going to continue to see measured growth.’’
His outlook is shared by many economists and financial specialists who predict that the economy, though wracked by mixed signals and uncertainty, will avoid slipping back into recession and will continue its long, slow recovery in the months ahead.
Exhibit A in that argument was a better-than-anticipated employment report Friday indicating the economy added 117,000 jobs in July, a modest bump that dropped the nation’s unemployment rate one-tenth of a percent, to 9.1 percent.
The small increase offered assurance that many companies are still hiring as they see opportunities for growth in the latter half of the year, even as cutbacks in spending by the government and consumers drain momentum from the recovery.
“We’re going to miss a double-dip recession, but not by much,’’ said Bob Murphy, a professor of economics at Boston College. “Companies are sitting on a lot of cash, and they’ve got to start spending it at some point.’’
For many businesses, the dour economic news of recent days was a reason for caution after a period of steady improvement in business conditions. But the danger now is that many firms will be paralyzed in the short term, wary of making new investments that would make them vulnerable if the economy retrenched.
To John Fowler, executive director of the mortgage banking firm Holliday Fenoglio Fowler LP, there is no reason to panic. While there is plenty of unease, he said, conditions are improving steadily enough to prevent the kind of spiral that plunged the economy into recession in 2007.
“We’re seeing a lot of transaction activity,’’ he said. “Clearly people are getting squeamish, and I think a lot depends on what happens during the next several business days. But when opportunities arise to grow and expand, companies have plenty of capital to take advantage.’’
Slye said firms that Jones Lang LaSalle deals with are still carefully calibrating any expansions - in terms of hiring and taking on more real estate - to ensure they are not locking themselves into costs that would become burdensome if the economy remains weak. Still, he added, expansions are happening nonetheless.
“There’s an expectation that we’re going to continue to have a choppy economy in the next 18 to 24 months,’’ he said. “It’s a deeper recession than people thought, but I think we’ll begin to see growth accelerate in 2012.’’
Casey Ross can be reached at firstname.lastname@example.org.