2006 and 1.35 million in 2007. Sales of existing homes will also continue to fall, by another 10% in 2008.
GDP AND GMP (GROSS METROPOLITAN PRODUCT)
Employment growth is decelerating this year, although the deterioration has been gradual. Employers are becoming more cautious about hiring, which will weaken a key support for consumer spending. Payroll employment will slip to an average of 75,000 per month over the next six months. That is more than 100,000 fewer per month than the average gain in 2006.
Rising home prices were once the fuel that allowed consumer spending growth to outpace real income gains. With declining home prices in effect, consumer spending will fall short of income growth. In 2008, consumer spending will slip to 2.0% growth, well below a 3.1% gain in incomes. Auto sales, at 15.7 million units, almost a million fewer than in 2006, will have their worst year since 1998.
GDP is now projected to grow by just 1.9% in 2008, a full percentage point lower than would have been the case without the mortgage crisis. Table 1 shows the ten metros that will experience the largest losses in terms of real GMP growth during 2008 as a result of the mortgage crisis (a full list GMP losses for all 361 metros is shown in Appendix Table A2, pages 8-16.). While our forecast scenario does not project a recession, 128 metros are pushed into sluggish real GMP growth of less than 2% in 2008. Growth is cut by more than a third in 65 metros, and by more than a quarter in 143 metros.
Myrtle Beach, South Carolina is expected to suffer the most marked loss, growing 1.7 per- centage points less than it would have in the absence of the mortgage crisis. This implies a loss of more than $240 million dollars of nominal GMP. The most affected state will be Cali- fornia, however, with four of the metros on the top ten list. In Table 2 we order the metros by the magnitude of their GMP loss. The largest metro, New York, loses over $10 billion in 2008 GMP, followed by Los Angeles ($8.3 billion), Dallas ($4.0 billion), Washington ($4.0 billion), and Chicago ($3.9 billion). The combined economic loss of the top ten exceeds $45 billion.
Myrtle Beach-Conway-North Myrtle Beach, SC
Rapid City, SD
Bay City, MI
Mount Vernon-Anacortes, WA
Revised Real GMP Growth,
Loss in Real GMP Growth,
% 1.85 0.73 1.22 2.88 1.47 2.15 1.72 1.06 0.51 1.79
% -1.70 -1.69 -1.62 -1.47 -1.45 -1.42 -1.37 -1.33 -1.31 -1.30
Loss of GMP, Millions
Table 1: Metros with Highest Rate of Loss of GMP Growth