Prediction on When the Housing Market Will Recover – Guaranteed!
Drew,
Great post on how unemployment and home prices connect. Unemployment numbers, I always figured, were higher than reported, they drop off the numbers that have expired and can't collect the benefits anymore. Percentage is much higher than the reported 9.6%
Thanks!
Increases in employment, both more jobs and better paying ones, will spark a housing recovery.
After several years of depreciation every homeowner wants to know when their home, most American’s biggest piggy bank, will start increasing in value again.
Well that’s not going to happen until we see gains in employment and incomes.
It’s simple math – what you can afford to pay monthly for housing is directly related to how much you make.
So first you need a job, so you can afford something, and then you need to get periodic raises so you can afford more and more and more.
How many homeowners bother to look at unemployment and employment numbers? Hmmm…
How many have been to the website of the Bureau of Labor Statistics (BLS)?
….?
Just as I suspected – not many.
Well, before we go visit the BLS, let’s examine how housing prices and unemployment are connected.
Comparing Housing Prices & Unemployment
Notice in the chart above that when unemployment (the blue line) goes down, housing prices usually go up.
Simply put, when people have more money to spend the economics of supply & demand show that they will use this money to drive prices up on the things that they want.
The opposite is also true as the next graph shows by comparing drops in housing values to job losses in the top 100 metro areas:
Given this important link between jobs and housing prices, we should probably take a look at where the nation’s job picture is.
So let’s go take a look at what we can at the Bureau of Labor Statistics the numbers they report.
Unemployment NumbersAs of August 2010, the official unemployment rate, according to the Bureau of Labor Statistics, is at about 9.6%.
Supposedly, it’s starting to level off as all the stimulus money plowed into the economy (and onto the federal debt) works its way through the system.
According to the government, without the stimulus, unemployment would have been a lot worse:
Here’s exactly what the BLS site says about unemployment in August:
Nonfarm payroll employment changes little (-54,000) in August, and the unemployment rate was about unchanged at 9.6 percent, the U. S. Bureau of Labor Statistics reported today. Government employment fell, as 114,000 temporary workers hired for the decennial census completed their work. Priveate-sector payroll employment continued to trend up moestly (+67,000).
The number of unemployed persons (14.9 million) and the unemployment rate (9.6 percent) were little changed in August. From May through August, the jobless rate remained in the range of 9.5 to 9.7 percent.
Ah, but the BLS is part of our federal government and they’re not above a little slight-of-hand to make the numbers look better and improve their odds of getting re-elected.
Let’s dissect the August report a bit to see what we can see…
Well in the BLS quote above, they state the number of unemployed is 14.9 million people, which leads to an unemployment rate of 9.6%.
But wait there’s more! Look at these tidbits:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 331,000 over the month to 98.9 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
About 2.4 million persons were marginally attached to the labor force in August, little changed from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
So, you’re stuck working a part time job because you can’t find a full time job, even though you may desperately need one, you’re not included in the unemployment numbers? What happens if you’re trying to feed your family by working two or three part time jobs? Talk about skewing the numbers!If we add these people into the mix, we get much higher numbers on unemployment – 26.2 million Americans are out of work or underemployed.
That’s an unemployment rate of 16.4% not the reported 9.6%!
Surprising, this number is published by the BLS and is referred to as the U-6 number.
Why does the media publish the 9.6% number when the truer 16.4% number is so easy to find?
Your guess is as good as mine.
SummaryWell, where does all this leave us?
There’s been a lot of media mention of the term, “jobless recovery”. The term refers to how companies seem to be improving their profits without hiring workers back.
My question is, if workers don’t go back to work where are people going to get the money to actually buy things like cars and houses?
How can that be called a recovery?
For homeowners out there wondering when they’ll see the values of their homes rebound, I hope you now realize how important the unemployment rate is to that happening.
Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy
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Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
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