If anyone had any doubt that the subprime mortgage/credit crisis is taking its grim toll on other aspects of the U.S. and world economy, here’s a sobering figure:The unemployment rate skyrocketed to 5 percent (and,yes, that is considered high for the U.S. and a sign of a faltering economy) while employers added only about 18 thousand jobs last month.
Many economists are now saying this could be a critical warning sign that the nation’s economy is slipping into a recession—defined as an extended period of a shrinking economy and growing unemployment at the same time. Sound familiar?
There are predictions that the Fed, yet again, will lower key interest rates for banks in an effort to inject some energy into the economy.
The stock market, of course, took its own nose dive the day the negative numbers were revealed and there is little reason to believe that the market won’t continue its wild roller coaster ride.
Sure, there are other factors impacting our economy–oil prices hitting $100 dollars a gallon,political instability in many parts of the world (hint: Pakistan!) not to mention the steady decline of the U.S. dollar against the Euro.
But, even these can be linked back to the sub mortgage crisis in the U.S. which,afterall, really became a credit crisis long ago. Banks, governments,businesses and people do not like the notion that credit, in a credit driven world, is now hard to come by, even for relatively good customers.
True, the glut of unsold houses is bringing the price down, but people thrown out of work, or unable to find jobs, or credit or both, are not likely to be buying up all those hulking shells.
Yes, there are small parts of the country where we do see some light–but don’t count on it being at the end of the tunnel.
2008 is likely, think many economists, to be a year of still more foreclosures, ever tightening credit markets, fewer jobs and maybe even an honest to goodness recession.
See why when it comes to the real estate market here the knee bone is very much connected to the leg bone—and that bone appears to be fractured.
Article Author:
Charles FeldmanCharles has written 147 articles for us.
Visit Charles's Website: http://www.thefeldmanblog.com
Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog.
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{ 4 comments… read them below or add one }
This is a huge problem. I agree that you will see another surge of foreclosures, because of ARMs adjusting, and there being a rise in consumer debt. Also there aren’t many new jobs as you said. What is it going to take to get out of this recession?
I agree with Rick… This is a problem.
One great thing the US people have going for them is that a large part of the rest of the world wants to come to the US.
So the fear of the properties rotting may be a little overblown. Of course, the US is just not going to open the doors and say, everyone is welcome. And not all unsold houses are at premium or choice places.
But it may be worthwhile to remember that there is a vary big unmet demand out there.
I would agree with the “want to come to the US” commentor if I hadn’t spent the last two years in the Clearwater Florida real estate market. We thought that way for years, but now that we have tax, insurance and employment problems we are hemoraging citizens. According to our local paper, it costs about three times as much to rent a U-Haul leaving the state as it does to rent one coming into the state! Being a great country doesn’t guarantee that people will continue to want to come here any more than fabulous weather is able to overcome some serious local problems.