September employment report disappointed just about everyone, from the job seekers looking for a sign that their prospects are improving, to Democrats, hoping the statistics would not be used to batter them at the polls in November, to economists, who had predicted that the numbers would be weak – but not this weak.
The economy shed jobs for the fourth consecutive month, mainly because the public sector laid off about 77,000 workers, while the private sector didn’t create enough new jobs to offset those losses. The net loss left both the unemployment rate (9.6 percent) and the assessment that this is a jobless and joyless recovery, unchanged. The stock market rose, perversely, on the employment news, interpreting it as an indication that the Federal Reserve will take steps to energize the sluggish economic growth rate.
There was some good news to be found in the labor market reports, although it was largely obscured by continued evidence that employers remain reluctant to hire. But the number of people submitting new claims for unemployment benefits declined for the fourth time in five weeks, falling to the lowest level since July. Continuing claims also declined while the number of job openings increased for the second consecutive month, all signs that the employment trends are moving in the right direction, but too slowly economists, agreed, to have much impact on the unemployment rate.
Nearly 30 percent of the nation’s 14.7 million unemployed workers have been jobless for at least a year; 37 percent of them are in the 35-44 age group, and 34 percent hold undergraduate degrees, according to the Pew Economic Policy Group. Most economists are predicting that the unemployment rate will average 9.6 percent for the remainder of this year and remain above 9 percent next year.
“It’s the toughest employment market in most of our lifetimes, and hopefully it won’t get any worse,” Richard Wahlquist, president and CEO for the American Staffing Association, told CNNMoney.com. “But it’s not likely to get any better in the coming months.”
The National Bureau of Economic Research finally declared an official end to the recession in August, concluding that any future downturn would be a new recession, not a continuation of the existing one. Although some economists still see a high risk of a double-dip downturn, most seem to think the economy will grow fast enough to stay on the edge of the recession ditch without falling back into it, but not fast enough to boost the confidence of employers or consumers.
The unemployment rate is keeping the bankruptcy level high (the American Bankruptcy Institute is predicting nearly 1.6 million consumer bankruptcy filings by the end of this year) and confidence levels low. The Conference Board’s Consumer Confidence Index fell from 53.2 in August to 48.5 in September, its lowest reading since February of this year and far removed from the 62.7 peak reached in May of this year, when the recovery seemed to be strengthening.
Housing remains the darkest cloud on a gray economic horizon, as the end of the tax incentive for home buyers has left a wobbly market struggling to find its footing. After plummeting in August, existing home sales managed a 7.6 percent increase in August, but the 4.13 million annual sales rate was 20 percent below the same month in 2007 and the second lowest sales pace in at least a decade, according to the National Association of Realtors.
New home sales were flat in August -- which is to say, they remained dismal-- at an annual rate of 288,000, the second-lowest annual rate in almost 50 years.
“There is no upside momentum in housing, period,” Eric Green, chief market economist at TD Securities Inc., told Bloomberg News. “Unemployment is so high, consumer confidence is so low, household wealth is eroded and the psychology remains negative….Housing is bouncing along the bottom, unable to gain any traction,” he added. On the other hand, he pointed out, there is “little reason to believe it’s going any lower.”
Industry executives desperate for a glimmer of good news found it in the NAR’s index of pending home sales, which increased by 4.3 percent in August after posting a 4.5 percent gain in July, evidence, some analysts agree, that the market is finding its elusive bottom. Recent price reports suggest that the market may still have further to fall, however. The closely-watched Standard& Poor’s/Case-Shiller home price index continued to weaken in July, with prices in the 20-city index increasing by 3.2 percent year-over –year in July, down from the 4.2 percent annual gain recorded in June.
“Anyone looking for home prices to return to the lofty 2005-2006 [realm] might be disappointed,” David Blitzer, chairman of the S&P index committee, said in a press statement. “Judging from the recent behavior of the housing market, stable prices seem more likely.”
Desperately Seeking Stability
The continuing increase in foreclosure sales will make price stability hard to achieve, some analysts are warning. Lenders foreclosed on nearly 100,000 properties in August, 25 percent more than the same month a year ago and the most in any month since analysts began linking the housing market and “crisis” in industry reports. Nearly 25 percent of first quarter sales were “distress” sales, and some analysts predict that ratio could rise to nearly one-third of the total through the end of next year, keeping home prices flat or falling for at least the next three years.
Some say concern that prices will fall more (or the hope that they will) is keeping prospective buyers on the sidelines; others say the “shadow” inventory of foreclosure sales to come is creating a drag on the market. Whatever the source, the bottom line is “there’s more supply than demand,” Oliver Chang, a housing strategist with Morgan Stanley, told Bloomberg. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 percent or 2 percent a year.”
Some analysts are more optimistic. Housing economist Karl Case, co-founder of the Case-Shiller index, is one of them. While the downward pressure on sales and prices is clear, he notes, that pressure may be less overwhelming than it appears. Real estate brokers will tell sellers that while the pool of prospective buyers may be smaller than they would like, it only takes one willing buyer to make a sale. Case applies that theory to the housing market as a whole. While the high unemployment rate is a negative for housing, he agreed, “there are still a lot of people who are employed, many of whom have been looking for the opportunity to buy. And it doesn’t take a tremendous number of people to turn the market,” he told Bloomberg News, “because only about 5 percent of the stock trades in a given year.”