Essential Partners in the U.S. Economic Recovery: Employment & Housing

Posted on March 2, 2012


The U.S. Government reported on Wednesday, February 29 that the economy grew at a 3 percent annual rate in the fourth quarter of 2011 – somewhat faster than estimated. The Federal Reserve said that the U.S. economy expanded at a “modest to moderate pace” in the first two months of this year. However, Fed Chairman Ben Bernanke advised the House Financial Services Committee that despite bright spots in recent economic reports, unemployment will likely stay high and the nation’s recovery remain slow for the next several years.

Home values in large cities have fallen to their lowest level since the beginning of the housing debacle. A significant measurement of home assessment shows that homes fell to their lowest values since the start of the housing crisis in 2006. Fortunately, values are no longer in the free fall they were during the sub-prime mortgage calamity and credit crunch.  However, an abundance of home inventories and foreclosures continue to weigh heavily on home prices. Some economists say that home prices can still go lower.  However, there are fundamental components that support a housing recovery: low interest rates, record low prices, and a slight improvement in household incomes. In certain regions of the country, there are increases in sales and new construction.

Housing recuperation remains hindered by high unemployment, flat wages, and a difficulty in receiving business loans and mortgages from the banks. State and municipal governments firing workers coupled with the financial crisis in Europe will impact our nascent recovery. While the decline in the unemployment rate has been moving in the right direction, the amount of people out of work, underemployed, or that have just given up searching is still near record highs. With the prediction of only moderate growth for 2012 and the lack of significant new employment by corporations, the unemployment rate is not anticipated to show further improvement. Corporations first need consumer spending certainties and fiscal incentives to initiate hiring and spending in capital investments. The “Catch-22” phenomenon is that consumers need the jobs so they can start to spend in order to encourage corporations to hire more employees. People with jobs buy homes. Purchases of homes overlap into other industries (i.e., construction, finance, home repairs, retail sales, etc.) that then create the need for more jobs. The foundation of a reliable and solid U.S. economic recovery is the coupling of a housing industry revival and growth in employment.

There are many factors that are part of a recovering economy. The U.S. dollar provides a noteworthy helping hand in supporting our manufacturing exporters. While the official dollar policy of the U.S. is for a strong and stable currency, the administration, U.S. Treasury, and even the Federal Reserve Bank are unofficially comfortable with a lower-valued dollar to enhance U.S. manufacturers’ global competitiveness.

Advertisements
Posted in: Uncategorized