Local economists expect modest gains on Wall Street, and in jobs and real estate. Consumer spending could be a bright spot.

First, the bad news: Economists are expecting slow growth and recovery in 2012. According to the latest Wall Street Journal monthly survey, conducted in November, the gross domestic product is expected to increase at an annual rate of 2.3 percent and there’s a 25 percent chance of another recession.

The good news: The predictions might not pan out. Bill LaFayette, a local economist and owner of consulting firm Regionomics, urges people not to panic. “The economics community has been wrong time and time again since before the recession has started,” he says. “You have to take these predictions with a generous grain of salt.”

Economic growth has been accelerating, says George Mokrzan, senior economist at Huntington National Bank. “We saw slow growth in the first half of the year. It has picked up in the third quarter, which was actually quite a good quarter. ... [I see] a continuation of that trend into the fourth quarter, and that’s certainly positive.”

Central Ohio’s reputation for having a stronger-than-average economy leveled off somewhat in 2011. “Ohio, in particular, has been growing faster than overall in the early parts of the recovery. That’s slowed down now. Now, it’s more in line with the overall U.S. economy,” Mokrzan says.

Overall for 2012, Mokrzan forecasts continued slow growth, affected by factors including declining tax opportunities, a slowdown in energy prices and the lingering European economic crisis.

Consumers, on the other hand, should be a positive. “Despite a negative environment in many ways, they’ve come out and been spending. Retail sales are up on a year-over-year basis,” Mokrzan says. “Certainly, low interest rates are helping them do that. That is a major positive force going into next year.”

Jobs

“From a standpoint of our overall economic performance, [Central Ohio] was doing better than average in job growth until recently,” LaFayette says. “Between February and September, we lost 4,700 jobs while the U.S. and Ohio gained.”

In October, Central Ohio unemployment fell to 7.6 percent—down 0.5 percent from October 2010. Ohio’s unemployment rate was 9 percent, the same as the U.S. rate and down 0.7 percent from a year ago.

Employment has been good relative to the GDP, Mokrzan says. “The private sector has been generating jobs. Nobody doubts that there’s a long way to go to undo all the damage in terms of job loss. … In 2012, some of the pressure on state and local government will be easing somewhat and that should help the employment numbers a little.”

Housing

Through October, Central Ohio home sales beat 2010 levels four months in a row, according to the Columbus Board of Realtors. Still, year-to-date home sales were down 2.1 percent from 2010.

Total housing inventory fell 23.3 percent, leaving an 8.1-month supply at the current sales pace. The average sale price for single-family homes and condominiums year-to-date through October was $157,327, down 2.4 percent year-over-year.

The market is becoming more steady, says Jim Coridan, 2012 president of the Columbus Board of Realtors. “I think we’re going to have a slight uptick next year. Our national economist says 4 to 5 percent, but I think 2 to 3 percent is more accurate.”

“It’s coming back, but it’s just so slow because we’re not getting the job growth that we normally do when you get out of a recession. I’m hoping with corporations doing pretty well, that next year they will start hiring. They’re doing that a bit this year. People without jobs don’t buy houses,” Coridan says.

CRE

Central Ohio is “the only part of the state where we see population growth and job growth, and as a result we see good commerce going on,” says Mike Simpson, vice president of brokerage at NAI Ohio Equities. “Particularly in office and industrial, we continue to see absorption and we continue to see vacancy dropping slowly. I think the idea that we’re going to make leaps and bounds at any one time is not realistic.”

According to research from Marcus & Millichap, 474,000 square feet of new retail space was brought online in the Columbus metropolitan statistical area through the year ended June 30—up from 232,000 square feet the year prior. Planned projects total about 3.8 million square feet. Net absorption of 345,000 square feet has reduced the vacancy rate to 10.9 percent through the first half of 2011.

Steady, slow improvement should continue, Simpson says. “I think we’ll see an uptick in retail development. I’m sensing a pickup in demand for more retail product, meaning new storefront. We’ll see some of those announced in 2012. Also, we’ll see speculative office announced in 2012 in the strongest areas, those being Polaris and Easton.”

Wall Street

The investment outlook remains heavily influenced by Europe, particularly potential volatility in Greece, Italy and Spain, says Frank Wojcik, vice president and senior portfolio manager for Fifth Third Bank. “As we get closer to resolution, you’ll see some stability in the U.S. market. Markets should head higher once we have that resolution. I think it will come before 2012. There will be a concerted effort in December, especially in the Greece situation, which will lay the groundwork for the other countries.”

Wojcik predicts a market rise of about 15 percent in 2012, roughly 13,500 on the Dow Jones industrial average. “One of the outcomes of the European situation will be more money flowing into the U.S. economy, into U.S. financial institutions and U.S. stock markets. We’ll be viewed as a safe haven around the world. … As people look for yield and income and see quality U.S. companies increasing dividends, the stock market will get higher.”

Still, slow and steady wins the race. “It’s important for investors to understand what they own. I think quality will become very important in 2012,” Wojcik says. “If you’re comfortable with a company that is well-capitalized and you’re comfortable with their ability to generate cash flow, to gain market share and to increase prices, then I think that’s a worthwhile investment. Becoming overly aggressive and trying to have substantial returns in a short period of time puts that investment at risk.”

Reprinted from the January 2012 issue of Columbus C.E.O. Copyright © Columbus C.E.O.