ATTENTION REALTORS: HOUSING- Why Today's Recovery is Jobless - Krugmann's answer

By
Real Estate Agent with FHAllen, Sonoma Country and Vintage

 Why Today's Recovery Is Jobless..Krugmann's answer....HOUSING.

Prior to 1990, recoveries from recession, as measured by industrial output, were closely correlated with the return to higher levels of employment and a generally healthy job market.

Since the recession from 1990 to 1992, the pattern has changed with a significant gap developing between the onset of a recovery in output "e.g. industrial production" and the generation of jobs and a return of  more normal conditions in the labor market. In general, job growth and employment opportunity occur much later and frequently at a reduced strength in the business cycle.

Paul Krugman and other economists have suggested that this change is due to differences in the initial causes of the recession and the corresponding role of the housing sector.

Prior to 1990 recessions were largely caused when the Fed put on the brakes to stamp out inflation or fears of inflation. Tight money killed housing first and real estate dragged the general economy down with it. When the Fed subsequently eased, housing led the way back to growth along with more robust employment levels because housing and real estate are relatively labor intensive.

Since 1990 the financial system itself has been the source of economic problems.

The stock market crash  of 2000, ("the Internet bubble") spilled over into the general economy and produced a contraction in GDP. Coming out of that recession the number of jobs created was for several quarters barely sufficient to keep the unemployment rate from rising. Then the housing bubble began to inflate and employment began to recover.

The problem is that when  the sub-prime crisis ignited a general financial melt-down by way of exotic financial products tied to mortgage finance, housing finance became  seriously, if not irreparably damaged. Moreover the artificial boom in housing produced an overhang in the market in the form of rising foreclosures and overbuilt sub-divisions.

This has meant that housing has been unable to play its previous role in supporting economic recovery and the restoration of healthy job market conditions, notwithstanding unprecedented Fed intervention.

So what this implies, is this:  to restore economic growth and stability we have to have an effective housing policy.

ATTENTION: All Realtors...Let this administration hear our voices. Contacting your representatives does make a difference. 

 For further information about Paul Krugmann's article...http://tinyurl.com/ykea66
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                                                          Kathleen Bonham

                                              www.SonomaCountryAndVintage.com

                                              Healdsburg, Santa Rosa, Sebastopol    

Posted by

Kathleen Bonham

Vintage Home Specialist

Healdsburg, Santa Rosa, Sebastopol

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  1. Deborah Thornburg Peaks 12/29/2009 03:33 PM
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Tags:
subprime loans
recessions
employment opportunity
housing policy
jobless recovery
krugmann
exotic financial products
overbuilt subd

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