The nationwide recession may be official, but it should end by the second quarter of 2002.
This is the prognosis of two local economic gurus, Todd Martin and Carl Traub, who provided economic forecasts for the year 2002 to 200 people Wednesday at a Greater New Haven Chamber of Commerce breakfast.
“The bad news is that we are officially in a recession,” Martin said. “The good news is that once the Federal Reserve gets around to declaring, the recession usually is just about over.”
The National Bureau of Economic Research officially declared a national recession Nov. 26, but the economic slowdown began in March, Martin said. Martin, the chief economist for People’s Bank, said recessions typically last an average of 12 months.
The People’s Bank Business Barometer, an index of Connecticut’s economy, does not place the state in a recession, although it does show a slowing economy.
Martin presented a 30-minute slide show showing the status of and expectations for various segments of the economy. Traub, president of real estate firm Traub and Company, followed with the keynote address, outlining the New Haven Central Business District third quarter market report.
Both Martin and Traub said the Sept. 11 terrorist attacks changed the city’s economic outlook drastically, particularly for building occupancy rates.
The central business district includes office buildings downtown and at Long Wharf, comprising about 2 million square feet of total space. An additional 42,127 square feet became vacant during the third quarter of 2001. But according to the CBD report, New Haven’s current office vacancy rate of 7 percent remains lower than the national 10.8 percent rate.
New Haven failed to fill additional office space with firms relocating from New York following the Sept. 11 catastrophes, though.
“We had been hoping some of those firms would relocate to New Haven, but they just never made it this far east,” Traub said.
Martin said the residential market experienced similar effects, although some of the decline began prior to Sept. 11. New Haven County home prices are up 8.7 percent this year, but sales are down 3.6 percent and permits 6 percent since January.
But the local labor market remains tight. New Haven’s 2.8 percent unemployment rate is below the national rate, which is over 5 percent.
Despite the increase in office vacancies in the Elm City, construction of additional office space, particularly Class ‘A’ space, is planned for New Haven for the first time in 10 years. There is currently a shortage of Class ‘A’ space, the designation for the highest quality space. Groundbreaking for an addition to Granite Square at One Audubon on Whitney Avenue is planned for March, when Martin expects an economic rebound to begin.
Completion of the Temple Street Garage and the Mid-Block Garage over the next 18 months will add another 2,000 parking spaces for visitors to a rejuvenated downtown.
Traub said these redevelopment projects will help strengthen the local economy.
The Sept. 11 attacks could unite the country in the war against terrorism and help bring the nation out of the recession faster, Martin said.
“Recessions are necessary to restabilize the economy,” he said. “Hopefully, this downturn will continue to be relatively mild.”