Following its most recent meeting, the Federal Open Market Committee (FOMC) has issued a statement of its projections about the economy, but instead of “sugar coating” or garbling the message, let’s call it like it is—it’s not a recovery. Chairman Bernanke had already warned us to expect a “jobless recovery,” but exactly what is that? Isn’t that just another way of saying, no recovery? Those without jobs or who are bringing home smaller paychecks or whose employment remains precarious, would have difficulty agreeing that their financial picture is recovering.
For those of us in real estate related businesses, the FOMC said little about their expectations for the housing market; and since housing is a major component of the economy, the omission seems a bit strange. While the November and December reports both mentioned improvement in the housing sector, the January report continued to focus upon last year.
What the report did point out, however, is that the jobs market will remain tenuous at best, and continued high unemployment means no housing recovery. Conversely, the lack of a robust housing market only serves to keep unemployment at higher than normal levels.
Regarding the labor market the report stated:
Participants anticipated that labor market conditions would improve only slowly over the next several years. Their projections for the average unemployment rate in the fourth quarter of 2010 had a central tendency of 9.5 to 9.7 percent, only a little below the levels of about 10 percent that prevailed late last year. Consistent with their outlook for moderate output growth, participants generally expected that the unemployment rate would decline only about 2.5 percentage points by the end of 2012 and would still be well above its longer-run sustainable rate. Some participants also noted that considerable uncertainty surrounded their estimates of the productive potential of the economy and the sustainable rate of employment, owing partly to substantial ongoing structural adjustments in product and labor markets.
The report further states: The weakness in labor markets continued to be an important concern for the FOMC; moreover, the prospects for job growth remained an important source of uncertainty in the economic outlook, particularly in the outlook for consumer spending.
To translate the above: Unemployment to remain high for several years, and Americans should be prepared for a prolonged period of anemic economic growth. Those whose plans have been based upon a “V” shaped recovery must alter their course or have it altered for them.
Finally, our Fed wizards said: Because current conditions may differ from those that prevailed, on average, over history, participants provide judgments as to whether the uncertainty attached to their projections of each variable is greater than, smaller than, or broadly similar to typical levels of forecast uncertainty in the past . . . (Translated: Everything we’ve said could be wrong, but we’ve stated it well.)
Let’s call it like it is—It’s not a recovery yet; and won’t be one for a long time.
The Housing Guru: The one source for all your housing questions
John- I hear you & I feel your pain. As much as I'd like to disagree, because I am tired of all the negative press we all hear, you have some very valid points. Unemployment is the key that everyone seems to realize will drive the rate of this recovery. Consumer confidence is another key factor for the 80-90% of us who are still employed.
We have been given the lemons ,as they say, so what we need to do now is starting making the lemonade!
We need to put people to work on any level to get the consumer spending again. The successful programs of the Roosevelt era come to mind. There are State & National parks that need sprucing up, urban areas that could be cleaned & used as community gardens to help stock food shelters. There are so many more productive things that could put people to work than just continuing to extend unemployment benefits. These jobs may not be ideal, but they would give people a chance to do something positive & bring in some income while improving our environment. Our country is full of good people who want to work and contribute to society. Let's give them the chance.
This recession will not last forever & the foundation has been laid for recovery. Here are some positive points that we should focus (more) on:
We live in the greatest country in the world, and our politicians need to WORK TOGETHER to offer progressive plans & ideas in order to put people back to work. We can bring this economy back quickly if we can set aside our political differences.
Bill - While I'm skeptical of the government's ability to "create" jobs, I was heartened when the promise was made to repair our failing infrastructure. Unfortunately, little has been spent in that direction, and far too much has been wasted.
You pointed out that, our politicians need to WORK TOGETHER, and I strongly agree. If they would, we could have solved this problem long ago.
John, Just like shoving numbers around, words can be used to tell a different story. I agree, let's call it like it is. Kate
Hi Kate - Great photo! And yes, it would serve the people better if our "leaders" just leveled with us.
John,
It sure looks like it's going to be a painful next few years as the economy works to deal with the excesses of the past. Many are wondering when Washington is really going to get tough with Wall Street.
Esko - Many are beginning to wonder if DC has a clue!
I believe that the biggest drain on our economy is our Federal Government followed closely by our State Governments. Every dollar that is taken from the private sector and mis-spent by the governments is a dollar not spent in growing the economic infrastructure of our economy..the sector that provides more permanent jobs.
There are things our government can and should be doing (directing money to rebuild our roads, our energy grids, providing for our defense, etc. but then they should get out of the way and let us grow!
Calvin - I was surprised and disappointed to see how little of the "stimulus" money would be spend on our crumbling infrastructure.
John,
I believe one avenue to solving the unemployment problem is creating small business. The key is getting the impetus out there for people to do so.
Terry - Small businesses create the majority of our jobs, but they'er getting little help. They've been offered a $5,000 tax credit for each new hire, but without the confidence that the economy is really recovering, the tax credit is worthless.
Lots of good ideas here. To look for the positive, it was encouranging to hear about the first nuclear plant to be built in sometime.
The news this morning is higher than expected unemployment filings, and rising inflation. If this is recovery we're in trouble!
John,
Great Post. I see signs of recovery in my own area, in regard to jobs. But the housing market is still struggling with many home buyers be unable to secure mortgages to buy homes and the inventory is growing.
Thanks for sharing,
Matt Naumann
Janice - That's a start, but it will take years just to receive approval.
Jon - It's the "new normal" for recovery : )
Matt - I don't see how we can see significant improvement for a very long time.
The spin doctors keep chanting the word improvement, but that V shaped recovery is lookin more like an "L" !!! I'm not sure how Middle Class jobs will ever come back($14-$27 per hr.) !!!!!!!!!
John,
Thanks for your your analysis and insight. Not everyone reads this stuff. But, it's interesting to look behind the scenes to determine what is really happening.
Brian