“You were first into the
recession, which usually
means you are the first out.”
NELSON RISING
Maguire Properties Inc.
In the third quarter, “We had a negative
growth of 0.3%. The lowest in the past
four decades was 0.4% and that was in the
1969-70 recession,” he said. Also, “We have
lost jobs for 10 consecutive months, a total
of 11. 2 million jobs so far this year, more
than half in the past three months. But the
unemployment rate is only at 6.5%, which,
by historical standards, is not a terribly high
percentage, even given the pain people
seem to be feeling.” The highest recession
job-loss percentage was 10.7% in 1981-82.
As far as how the crisis came about, Rising said it is important to understand that
it didn’t happen over night. “Since the
1980s, Americans have consumed more
than they produce and they have been
able to do this by borrowing,” he said.
“We put it on credit cards and took out
mortgages.” Household debt has gone
from $680 billion in 1974 to $14 trillion
today, Rising explained. In 1990, national
debt was $3 trillion and by 2000, it had
almost doubled. The national debt is currently at $7.2 trillion, he said.
Rising also pointed out something trou-
bling: According to the US Consumer
Confidence Index, consumer confidence
fell to 38% in October, down from 61.4%
in September of this year. The lowest consumer confidence level of the past four
decades was 57.4%, he said. “This is particularly troublesome since the consumer
is over 70% of our economy. So these are
very serious headwinds.”
Almost two months into the crisis, there
are still unanswered questions and speculation about who is to blame, Rising said.
“There is plenty of blame to go around on
this, but I think the credit rating agencies
should be pretty close to the top of the list,”
he said. “They used models that were based
upon a mortgage market of $15 million.”
Rising continued: “A wise man once said
that things that aren’t sustainable tend to
end. And it wasn’t sustainable.”
What does this all mean for Orange
County? On a local level, OC was the epicenter of the subprime universe, Rising
said, adding that the economy in Orange
County in 2005 was the envy of the country.
“The same housing related industries that
drove the boom—and caused construction
employment to almost double from the
mid-’90s to the present—have led to the
economic downturn here after the housing bubble burst.”
But despite the current situation, Rising maintained there are better times
ahead for Orange County. “There are
several drivers for the eventual recovery
here,” he said. “Many financial firms that
are in areas such as Newport Beach, for
example, are still happy to pay high rents
to be close to their high-net worth clientele,” he explained, adding that “big,
well-managed firms are also investing in
the future.”
Tourism was another significant part of
OC’s economy, which Rising pointed to as
another driving factor for a rebound.
Rising closed his keynote speech with a
quote from Wayne Gretzky as to why he was
such a great hockey player: “I went to where
the puck was going to be.” Rising continued: “So, as all of us look at the future, let’s
try to think about where the puck is going
to be and I hope you all find it.”—SOCAL
