BluefoxToday blog : Unemployment and Why Housing Continues to Struggle

Unemployment and Why Housing Continues to Struggle

Unemployment and Why Housing Continues to Struggle

Each month when the Labor Department releases the statistics on unemployment and job creations, the numbers often do little more than confuse. Some months it looks as if they’re improving and others they seem to reflect a recession that won’t leave.

 

The employment numbers as reported often have little significance in the short-term, as they do sometimes fluctuate wildly; and they don’t always paint an accurate picture. For instance, while this month’s report showed an increase in the unemployment number from 9.6% to 9.8%, it only includes those who are actively seeking jobs. Those who have become so discouraged that they’ve given up their job search aren’t included—and that makes for a much higher number.

 

For a better understanding of unemployment it’s helpful to take a look at the overall trends, allowing us to see where we are and where we need to go in order to be in a legitimate recovery. The graph below from Calculated Risk helps provide that view. It shows just how far employment has fallen relative to other recessions and provides a good picture of where we need to be in order for the housing market to begin growing again.

graph of unemployment

What we see is that job losses during the current recession (I know it’s supposed to have ended, but the numbers tell a different story) were far more severe and show us further from recovery than any recession of the past 60 years. And the sad reality for millions of those unemployed is that their former jobs will never return. The ultimate impact upon the housing market has been and will continue to be dramatic; a robust housing recovery seems more than unlikely—more likely, impossible.

 

Sure, some sectors of the economy have seen improvement, and others will begin to improve; but the recovery will be slow and painful. In those areas where jobs are plentiful, the housing market will seem almost normal. However, the overall economy will continue to be plagued by the fallout from higher than normal unemployment, and the housing recovery will be grievously slow.

 

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Comment balloon 14 commentsJohn Mulkey • December 03 2010 01:36PM

Comments

Great information and insite. Unfortunately we are like a psychotic economy in total denial fo the free ride we've had for 30 years based on borrowing. The ride is over now and we must adjust our thinking and our culture in order to remain the worlds leader.

However, on a positive note, housing sure does seem like its seen the light at the end of the tunnel! Its a very fragile market at this point but showing signs of puylling through.

Posted by Chris "The Loan Ranger" McBrearty, NMLS 274079, FHA, VA, USDA, Loan Officer and Educator (People's Mortgage Company) over 7 years ago

Chris - We will have a recovery; it just won't look like one for a long time.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) over 7 years ago

Where does anyone get the idea that, even if we had 4% unemployment that the housing recovery would follow.

Folks have to get a job, but if they've been on unemployment for 99 weeks, that's not going to look great on an employment application. 

Further, many of the folks now unemployed have seriously damaged credit.  Who thinks thay'll be able to get financing in the next year or two???

The analysts need to look behind those unemployment numbers. 

Loss of credit is one of the most damaging effect of unemployment/foreclosure, etc. 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 7 years ago

Lenn - Every day I read articles and see pundits on TV telling us that we'er in recovery.  I understand that recovery is relative, but most are unaware of how far we've fallen.  It's a long--long way to the top. 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) over 7 years ago

Hi John, I think you're right when you say that most are unaware of how far we've fallen. I think there's a total disconnect between reality and the numbers the government continues to pump out. Job creation here in Pa. has been an on going joke and the housing market isn't getting any better.

Posted by Suesan Jenifer Therriault, "Inspecting every purchase as if it were my own". (JTHIS-Professional Home Inspection Team) over 7 years ago

We have a long way to go on all counts to get out from under this economy.  So many different factors are at play.

Posted by Rob Arnold, Metro Orlando Full Service - Investor Friendly & F (Sand Dollar Realty Group, Inc.) over 7 years ago

Sue - A home in my neighborhood that sold in 2007 for $525,000 just sold again for $399,000 and the seller was probably lucky to get that.  I've seen others sell for half their price of 3-5 years ago.  Most of the subcontractors I know are barely hanging on, and some aren't hanging on at all.

Rob - A long way, indeed.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) over 7 years ago

Despite what Lenn says...  Employment is the key to recovery.  When jobs come back, those WITH good credit will be more willing to get back in the market.  Supply will go down because there will be fewer new foreclosures coming onto the market (ditto short sales).  It is the key to a recovery of balance to the market. 

Posted by Lane Bailey, Realtor & Car Guy (Century 21 Results Realty) over 7 years ago

I hear you John. I see that same thing going on around here. Mike's a contractor as are our boys. So far we've been doing well. November is the time of the year things slow down to a crawl for contractors in this region, but so far he's still get work. We've been really lucky so far.

Posted by Suesan Jenifer Therriault, "Inspecting every purchase as if it were my own". (JTHIS-Professional Home Inspection Team) over 7 years ago

Your key phrase John is that jobs have been destroyed and will not come back.  So, if they will not, where will this "recovery" come from?

And there IS NO "recovery," despite the "news" and statements by gubment "officials!"

Posted by Jay Markanich, Home Inspector - servicing all Northern Virginia (Jay Markanich Real Estate Inspections, LLC) over 7 years ago

Lane - Unfortunately, housing has been the engine that drove up employment following each recession; and it's not happening this time.  That's why I think the overall recovery as well as in housing will be slow and painful.

Sue - Glad to see you're getting work.

Jay - Ask the millions of unemployed if they believe the recession is over.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) over 7 years ago

The 9.8% figure sure took all the air out of the balloon last week !!! People keep buying the jobless recovery !!!

Posted by Michael J. Perry, Lancaster, PA Relo Specialist (KW Elite ) over 7 years ago

John,

That sagging red line for the current recession is scary indeed. It seems that housing will be muddling along for a few years, if not longer.

Posted by Esko Kiuru over 7 years ago

Michael - And with many having giving up the job hunt, the real number is actually higher.

Esko - The red line paints a dismal picture.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) over 7 years ago

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