No demand = No jobs recovery.
Don’t expect any surprises to the upside when The Department of Labor releases the Employment Situation Report for August this Friday, September 7. Housing is pulling itself off the mat, but can’t shoulder the weight of the entire jobs market recovery that is plagued by weak consumer confidence and tattered household financials, and the challenges of our major trading partners overseas.
The Department of Labor will release the Employment Situation Report for August this Friday, September 7. While there will be considerable attention on the report, especially from the two opposing presidential election camps, there is little possibility that the report will show a drastic boom in the economy. For one, unemployment remained relatively unchanged throughout the summer. And though the housing market has seen some recent positive reports, the fiscal issues plaguing average Americans as a result of the economic crisis are virtually inescapable.
According to a recent article in the New York Times, median families have seen their incomes drop around 20 percent, and have seen their net worth cut in half during the economic crisis. And, instead of using disposable income to buy goods and services or pay down debt, middle-class Americans are socking the money away as “precautionary measures.”
So while the report won’t likely show that the economy is getting worse, it is pretty difficult to argue that the economy is getting better – if anything it is less worse.
In July, nonfarm employment rose and the unemployment remained relatively unchanged at 8.3 percent compared to the prior month. It looks like the labor market performed similarly in August. The weekly unemployment claims over the past month have remained relatively consistent.
Housing is undoubtedly a critical component of the economy, so many analysts may offer more optimistic forecasts based on recent positive housing reports.
The National Association of Realtors reported that existing-home sales rose 2.3 percent and pending home sales rose 2.4 percent in July. The Department of Housing and Urban Development’s (HUD) New Residential Sales Report showed that new home construction sales rose 3.6 percent in July. Finally, HUD reported that privately owned housing starts increased 21.5 percent year-over-year, and housing completions rose 7.1 percent from June.
But these reports offer only a shallow picture of the housing market and overlook the systemic stressors facing American families. While Quantitative Easing and the series of refinance and foreclosure prevention programs have helped distressed homeowners, these homeowners remain over-leveraged with nearly one-third of all homeowners underwater on their mortgage. Moreover, these homeowners have faced income reductions, daunting unemployment, and severe declines in household wealth. These factors negatively impact housing demand, which is holding the housing market back from a meaningful recovery and contribution to the larger economy.
So while the report won’t likely offer Republicans a wealth of material on the deterioration of the economy under the current Administration, it certainly won’t offer Democrats anything to brag about.