Will 2012 Be A Repeat Of 2011?

Conjure up the image of enthusiastic Americans getting up in darkness on Black Friday and racing to shopping malls to spend hard-earned money. Now, contrast that with the heads of the major European countries acknowledging in the same week that the end of the euro is a distinct possibility.

On one side of the Atlantic, cautious yet stubbornly optimistic Americans began to open their wallets and spend. On the other side, the line in the sand is being drawn and the cost of short-term borrowing nearly doubled in the last quarter of 2011.

Whether Europe is able to identify a modern-day white knight country willing to lend multiple distressed European countries massive amounts of money at below-market interest rates, or whether the European Central Bank concludes it has no choice other than to print money, the end game in Europe may play out in the early part of 2012.

If the dark cloud hanging over Europe does not go away, what does this mean for American businesses? If Europe does fall back into its second recession in the last three-plus years, will they take us with them? Will the 27 percent of all American exports that are currently sold to European buyers find another home in China, Brazil or India? For years, the talk has been of Europe decoupling itself from its dependence on the United States. Now we’ll find out if the reverse is true.

The Scene Here At Home

Other indicators in the U.S. are mostly positive, in spite of what has been happening in Europe. The U.S. economy will likely grow about 2 percent in 2012 (roughly the same as in 2011), which is enough to avoid another recession but not enough to make much of a dent in unemployment. Faster growth in the second half of 2011 rescued the U.S. from a second downturn. It also shows that pent-up consumer demand and business confidence can indeed provide enough momentum to overcome a season of stock market gyrations, a European financial crisis and a debt limit drama in Washington.

After growing at an annual rate of only 0.9 percent for the first half of the year, gross domestic product grew at a 2-percent rate in the latter part of 2011. Business investment surged at a 15.6-percent annual rate, accounting for half of the increase in GDP. Consumer spending rose at a 2.3-percent annual rate – not great, but well above what would point to recession.

As I’ve said in this column before, consumer spending may be important to our economy, but it is business investment that keeps us growing.

Unfortunately, growth isn’t accelerating as it normally does in a recovery. That’s been the big rub all along since June 2009. The economy will likely grow at the same pace through 2012, indicating that a sustained recovery still hasn’t started the way we would like it to – more than two years after the end of the Great Recession. There is also little prospect of a major fiscal or monetary stimulus, or any other development that might boost growth in the short run.

The economy should stay out of the ditch (so to speak), but it will remain vulnerable to possible shocks (typically war, terrorism, oil price shocks or natural disasters have been historic culprits). One or more of these could tip it into a temporary contraction, as we have seen in recent years.

The Jobs Forecast

Look for moderate job growth to continue in 2012, stumbling forward next year at a pace of about 150,000 net new jobs a month. That’s just a bit more than the growth of the labor force and will result in the current unemployment rate of 9 percent falling to around 8.5 in 2012, during which the economy will create about 1.8 million jobs. The economy created about 1.5 million in 2011. The private sector will add about 2 million jobs after creating around 1.7 million in 2011.

Private-sector job growth will continue while government employment continues to shrink. Federal job cuts have been a small share of public-sector job losses so far, but expect that to grow as deficit cutting in Washington accelerates. A good bet for gains next year are for temps and consultants. Tapping this source enables a firm to stay flexible in case their fears are borne out and the economy stalls instead of expanding further.

How About Housing?

Housing, the Achilles’ heel of the economy thus far, is showing signs of improvement. But the gains in 2012 will be small and won’t do much for economic growth. Home prices will fall a bit more (about 2 percent) through spring 2012 before making up that ground by the end of the year. Holding down a price rebound are the 3 million homes in the foreclosure pipeline. When they finally reach the market, they typically sell for up to 25 percent less than homes sold through normal channels, casting a shadow on prices throughout the neighborhood. Foreclosures will most likely drop significantly in 2012 but will still be somewhat of an anchor on prices.

Home construction will increase about 15 percent in 2012, most of it apartment buildings to serve the hot rental market. A sustained recovery in the building of single-family homes will require more of an improvement in job creation than is expected in 2012, so don’t anticipate a big gain on house construction next year.

Rock-bottom mortgage rates aren’t having much of an impact either. They’re historically low – around 4 percent for a 30-year fixed rate loan. They’ll stay close to that rate into mid-2012 and rise only slightly by year’s end. More banks are requiring a 20-percent down payment, a high hurdle for some, especially first-time home buyers.

Leave a Reply

One comment on “Will 2012 Be A Repeat Of 2011?

  1. If you are planing on publishing articles of this nature please word the heading more carefully. Words are powerful, even more so in the media. Thank You.

More From Finance/Operations...

October 10, 2017

Sharpen Your Skills in Cost Management and Profitability With This Online Course

The University of Florida is offering a new online course on costing and profitability. The course will take growers through the process of how to accurately evaluate cost of production, labor efficiency, pricing, and equipment investment decisions.

Read More
Willoway Nurseries Team

October 1, 2017

How Willoway Nurseries Gets Its Staff Engaged in The Company’s Future

Willoway Nurseries in Avon, OH, is creating a culture with people who think, act, and feel like owners. Learn how its team is taking the business to the next level.

Read More

September 21, 2017

Horticulture Is All About Connections

The beauty of our industry is that we are more than willing to reach out and help those around us. What connections can you make today to help your business, and what can you offer to help another grower?

Read More
Latest Stories

October 10, 2017

Sharpen Your Skills in Cost Management and Profitabilit…

The University of Florida is offering a new online course on costing and profitability. The course will take growers through the process of how to accurately evaluate cost of production, labor efficiency, pricing, and equipment investment decisions.

Read More
Willoway Nurseries Team

October 1, 2017

How Willoway Nurseries Gets Its Staff Engaged in The Co…

Willoway Nurseries in Avon, OH, is creating a culture with people who think, act, and feel like owners. Learn how its team is taking the business to the next level.

Read More

September 21, 2017

Horticulture Is All About Connections

The beauty of our industry is that we are more than willing to reach out and help those around us. What connections can you make today to help your business, and what can you offer to help another grower?

Read More
Worker taking cuttings at Vivero Internacional.

September 11, 2017

Vivero Internacional Elevates Clean Cuttings to New Hei…

One of the last independent cutting operations, this fast-growing company raises the standard for delivering clean, high-quality unrooted cuttings.

Read More
Selecta Sponsor bed at Raker trial gardens

September 5, 2017

C. Raker & Sons Acquired By Roberta’s Unique Garden…

Ownership will change hands in December, and Raker will supply young plants for the 2018 season. Beyond that, leadership of the two operations say they are excited to move forward with a partnership that will continue to supply the industry, and gardeners, with top-quality plants.

Read More

August 1, 2017

MPS Honors D.S. Cole Growers for 10 Years of Sustainabi…

At Cultivate’17, a ceremony to mark a 10-year milestone since D.S. Cole Growers became involved with More Profitable Sustainability (MPS), as the first U.S. grower to achieve MPS certification, took owner Doug Cole by surprise. Separate celebrations also recognized Metrolina Greenhouses and Dümmen Orange for achieving MPS certification.

Read More
Nexus greenhouse construction for Knox Cannabis Facility

July 27, 2017

Ornamental Growers Will Revolutionize Cannabis Industry…

Professional growers have much to offer the emerging cannabis market, according to the co-owner of Knox Medical, one of the licensed cannabis producers in Florida.

Read More
Ball ColorLink logo

July 11, 2017

Get Guidance on Running Your Business from Ball ColorLi…

Representatives from Ball ColorLink will be on-hand at Cultivate’17 to answer questions and present business-building tools and industry insights to growers.

Read More
Lean Consortium in Washington

July 10, 2017

Washington Growers Join New Horticulture Lean Consortiu…

The group of growers has committed to learning and applying the principles of Lean, a method for eliminating waste that results in more value to customers delivered at a lower cost, in a shorter time, with fewer defects and less human effort.

Read More

April 11, 2017

Jerry Halamuda of Color Spot Nurseries Retires

The co-founder of Color Spot Nurseries has retired, effective immediately, and has named a replacement.

Read More

March 21, 2017

How Greenhouse Vegetable Growers Can Prepare for a Prod…

The United Fresh Produce Association is holding a Recall Ready Workshop in April that is designed to help growers properly manage a recall, from liability to communications.

Read More

March 14, 2017

Expanded Customer Footprint, E-Commerce, Succession Key…

Costa Farms' acquisition of indoor foliage producer Delray Plants rocked the industry, but the story behind Delray Plants' sale is the same as for many growers struggling with succession planning. For Costa Farms, the strategic purchase expands its customer footprint and also fast tracks its foray into e-commerce.

Read More

March 10, 2017

Costa Farms Expands With Purchase of Indoor Houseplant …

Costa Farms annnounced March 10 that it has acquired Delray Plants, one of the leaders in the indoor houseplant industry. The two operations are committed to the same values, principles, and goals to grow the industry, and will fit well together to accomplish this, say Randy Gilde, CEO of Delray Plants, and Joche Smith, CEO of Costa Farms.

Read More
Ken and Deena Altman

March 7, 2017

Altman Plants in Escrow to Purchase EuroAmerican Propag…

Ken Altman, a co-owner of Altman Plants based in Vista, CA, has confirmed that the operation is currently in escrow to purchase EuroAmerican Propagators, the Bonsall, CA-based young plant and finished plant grower that filed Chapter 7 Bankruptcy on Jan. 23, 2017. Ken and Deena Altman are co-owners of Altman Plants and The Plug Connection, along with their son Matthew, who has recently bought into the family business. The 55 acres of land and all of the facilities on it, which were previously owned by Jerry Church, a partner in EuroAmerican Propagators, are part of the purchase agreement currently in escrow, Altman says. However, it would not be absorbed by Altman Plants, which in 2016 was number 3 on Greenhouse Grower’s Top 100 Growers list with more than 11 million square feet of environmentally controlled greenhouse production, 62 acres of shade production, and 400 acres of outdoor field production. Altman Plants’ property […]

Read More
EuroAmerican Propagators Greenhouses

February 14, 2017

Suppliers Comment on Plant Genetics’ Fate After EuroAme…

Since the operation’s bankruptcy filing on January 23, 2017, suppliers associated with EuroAmerican Propagators have updated Greenhouse Grower on what the operation’s bankruptcy means for them – and how it will impact grower customers.

Read More
Stephanie Whitehouse

January 17, 2017

Stephanie Whitehouse Takes Her Passion for Plants to Di…

Stephanie Whitehouse, who has spent the last seven years as the Sales and Marketing Director for Peace Tree Farm in Kintnersville, PA, recently joined Dickman Farms Greenhouse and Garden Center in Auburn, NY, as the company’s new Retail General Manager.

Read More
Laura Drotleff

December 6, 2016

Are You Driving Young Growers Away? [Opinion]

In a time when the industry is facing a critical shortage of both labor and skilled, educated growers, it's important that grower operations don't unwittingly turn candidates off to a career at their business or in the industry in general. Take a closer look at your hiring practices to ensure you are being inclusive and not breaking any laws.

Read More
Trays move on an overhead conveyor to the end of the production line, where workers carefully pack the cleaned, sized, graded, counted and sorted Calla tubers

November 29, 2016

Texas Judge Halts Overtime Rule; Here’s What It Means F…

According to Craig Regelbrugge at AmericanHort, the injunction against the overtime rule is welcome news for horticulture.

Read More