Economic Recovery Continues to Disappoint

Unstable home prices, unusually severe weather conditions, rising energy costs, concern over growing debt, and the rising national unemployment rate (up from 8.8 percent in March to 9.2 percent in June) have made consumers extremely nervous.

While the 2008-2009 economic downturn was certainly severe, this recovery has still been unusually weak, according to Kermit Baker, AIA Chief Economist. In prior post-WWII recoveries, the U.S. economy averaged more than 6 percent growth (inflation adjusted) in the first year of a recovery, and more than 4 percent in the second. In the first year of this recovery, growth was only 3 percent. When figures for the second quarter of this year are released, it's likely that the second year gains will be below the first year.

With such slow growth, most businesses and institutions do not feel the need to expand their facilities, although spending on renovations to existing facilities has remained quite strong. For example, McGraw-Hill Construction reports that nonresidential construction awards for new buildings and additions declined 43 percent between 2008 and 2010, while awards for building alterations declined less than 2 percent over this period.

Both the University of Michigan Consumer Sentiment Index and Conference Board Consumer Confidence Index have fallen since the beginning of the year. Business confidence has not fared much better. Moody's Economy.com reports that business confidence has fallen significantly from March. The recent slowdown in the economy has many businesses worried that 2011 will generate significantly slower growth than anticipated.

- Courtesy of AIA