Tuesday, July 15, 2014

July 15, 2014 Real Estate Report - Still Work To Be Done

As the euphoria wears off in the aftermath of our stellar June employment release, we realize that there is still work to be done in order to fully recover from the financial crisis and deep recession. The recovery has been going on for five long-years, but it is still not fully mature. For example, while we have recovered all jobs lost during the recession, we have not added enough jobs to accommodate the population growth that has occurred during and since the recession. Even at today's increased pace of job growth, this void will not be filled for two years or longer. Furthermore, while the unemployment rate has dropped to 6.1% -- which was the lowest in almost six years, the "underemployment" rate still stands at 12.1%. The underemployment rate includes those who are working part-time because they can't find full time jobs. The labor participation rate stands at 62.8% which is a 36-year low. It is true that the baby boomer generation is reaching retirement age and this contributes to the labor participation statistic. On the other hand, it is not merely how many jobs are created -- it is also what type of jobs are created. America needs more high paying full-time jobs. So before we celebrate the end of bad times, we must understand that there is truly more work to accomplish. The fact that we have more room to grow is actually good news for right now because this gives the Federal Reserve Board latitude to keep interest rates lower for a longer period of time and not worry about the economy overheating. The markets will cause rates to rise as we witness the start of the cycle of better times. If this surge in job hiring spreads to the real estate markets, we will start making up ground in a hurry instead of the snail's pace of the past five years. If that happens, expect the Fed to act much more quickly. Keith Stewart 773-529-7000

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