Economic Update – Valuations Down Across the Pond, While  American Jobs Continue to Dwindle

On a day when a U.S. Report spelled out just how much American commercial real estate values are down, across the pond, properties also lost value. Commercial property valuation in the U.K. and Ireland lost a record amount in 2008, according to indexes compiled by Investment Property Databank Ltd.Values for U.K. office, industrial and retail properties collectively fell 26.4 percent in 2008, while the drop in Ireland was even more precipitous: 37.2 percent. According to IPD, that essentially means that the runup in valuation of British Isles’ commercial real estate from roughly the beginning of the 2000s until mid-2007 has evaporated. Back in the States, Automatic Data Processing is reporting that the U.S. private sector eliminated 522,000 jobs in January, ahead of government reporting on unemployment, which is coming on Friday. Sometimes, however, ADP has overestimated job losses, at least compared with the U.S. Commerce Department’s numbers. In December, for example, ADP pegged job losses at 693,000, later revised to 659,000, while Commerce said it was 524,000. Still, no one disputes that January’s job numbers will be as bleak as the weather. On the other hand, the Institute for Supply Management said on Wednesday that its nonmanufacturing index rose to 42.9 in January from 40.1 in December, not long after ISM reported that its factory index was up 35.6 in January, compared with 32.9 in December, which was the lowest since the 1970s. Both indexes remain well below the 50 benchmark that divides contraction from expansion, but at least the numbers didn’t get any worse. A little more of these kinds of numbers and the elusive bottom of the economy might be in sight. Wall Street seemed pleased on Tuesday, but on Wednesday investors were feeling a bit out of sorts, either dispirited by the job numbers or by lackluster earnings at Kraft Foods Inc. and Walt Disney Co. If people are cutting back on macaroni and cheese and shunning Mickey, what hope does the wider economy have for ’09? In any case, the Dow Jones Industrial Average dipped 121.7 points, or 1.51 percent. The S&P was down 0.75 percent, and the Nasdaq lost a scant 0.08 percent. Or maybe it was the prospect of getting by on $500,000 a year that spooked investors. Granted, President Obama’s new pay cap initiative only applies to a small class of companies that are already up to their eyeballs in bailout money. But it seems to reflect the parsimonious mood of the nation, and companies are busy sacrificing high-profile perks such as airplanes and Vegas junkets like so much jetsam, perhaps hoping nothing really valuable (like bonuses) will need to be tossed overboard.