Reality

One of the things that is important to me, is to always deal with the facts as opposed to blind optimism. The fact is that we are in a troubled economy. Here is a story from today's Providence Journal that bears this out.

R.I. economy at its worst in 25 years

July 15, 2008 By Lynn Arditi

Economically speaking, Rhode Island is in the midst of the “worst year” in a quarter century, according to a local index released yesterday. After a brief uptick in April, the Current Conditions Index in May plunged back to its lowest value in the index’s 25-year history. Eleven out of 12 indicators deteriorated, as the unemployment rate spiked to 7.2 percent and consumers hit by rising food and fuel prices cut back on spending, causing retail sales to plunge, according to the index’s manager, University of Rhode Island economics Prof. Leonard Lardaro. “Even during the horrible year of the [1991] banking crisis,” Lardaro said, “it wasn’t statistically as bad as this.”

After April’s bump, the CCI index in May fell back to its previous value of 8, where it had been during four of the last five months. Prior to this year, the only time the index fell that low was in April, 1991. The CCI measures the behavior of 12 economic indicators each month and compares them with what they were during the same month a year ago. The changes indicate whether Rhode Island’s economy is growing, contracting or stagnant. Any indicator above the neutral value of 50 means the economy is growing, anything below means it’s shrinking. For 11 of the last 12 months, the index has languished below 50, and during January, February, March and May, the monthly values sank to 8. In April, the index climbed to 17, prompting Lardaro to suggest there was reason to hope that the economy might begin to turn around. Two indicators in April improved, albeit slightly. Retail sales, which had been declining, “squeaked by,” and manufacturing wages also rose, according to the index. But any hope of a near-term recovery was dashed in May when the index fell back to a value of 8.

The housing market meltdown has slowed the rate of house construction, with single-unit building permits down 33.3 percent in May from the same period last year. The building slowdown, however, could be viewed as a “bright spot,” Lardaro said, because it may help the state reduce its bloated inventory of unsold houses. The labor market also continued to deteriorate in May, with layoffs driving up new unemployment claims by 14.3 percent from May of last year, although the number of claims has improved during the past three months. The share of people who ran out of their unemployment benefits — “benefit exhaustions” — climbed 31.9 percent compared with last year. Employment service jobs, a “leading labor market indicator” which includes temporary help, fell by double digits for the fourth consecutive month. (Employment service jobs tend to decline when the economy is contracting and rise when it’s growing.) Government employment also shrank, and is expected to continue to do so as state agencies begin to lay off employees to bring spending in line with budget cuts. Meanwhile, the size of the labor force in May shrank, which suggests that some residents either gave up looking for work or got jobs in other states. Not surprisingly, the weak job market, along with rising food and fuel costs, have caused consumer sentiment to plummet and spending to shrink.

Retail sales fell 10.6 percent in May, although the overall level of sales remained relatively high, Lardaro said. “We’re in the second stage of a recession,” Lardaro said. “This winter it could get even worse…” The only indicator that improved in May — the reason that the monthly index remained above zero — was manufacturing wages. But that, too, could be short lived. Total manufacturing hours in May fell at its most rapid rate since September 2002, as both the work week and employment declined.

This makes it all the more important for people to find a real estate agent who will be their advocate and who will put their best interest above all else, including the sale and possible commission. And it makes it all the more critical for me to be informed so that I will be able to help my clients deal with the reality of this market. Now I promise to find some good news to report. I Googled "Good News" but nothing yet.....