Economy Singin' the Blues?

I highly recommend the blog, The Big Picture. In five paragraphs as part of a larger post, they capture what's going on now in the US economy, and it ain't pretty. In the world of blogs, it's a trite cliche to say "read the whole thing," but still, sometimes it applies:

Let's review: Why might we think these numbers make so little sense to begin with? We know (at least those of us who have been paying attention) that the economy has been unusually Real Estate dependent this cycle. We have seen a vastly disproportionate amount of new job creation come from the Real Estate complex (including agentsm, mortgage brokers, etc.) We also know that the Housing market has cooled dramatically -- those of us paying attention also saw the beginnings of this as long ago as August 2005.

Further, we know that by just about every historical measure, this has been the weakest job creating recovery cycle in the post WWII era. We have previously noted that the unemployment rate is down due to NiLFs: Not In Labor Force. Barron's described it as "the incredibly shrinking labor force, a phenomenon that's largely responsible for the deceptively modest unemployment rate." The labor participation rate touched is near 15-year lows.

Using other measures that include these slackers, unemployment is actually much higher than the reported 4.6%: The well respected Liscio report noted the actual number could be much higher of a jobless rate. If one includes the so-called marginally attached workers and part-timers who really want to be working full time, the unemployment rate weighs in at a formidable 9.4%.

Jobs that we are creating by and large have been paying less and offering weaker benefits than the jobs they have replaced. (This is a factor in the negative savings rate, but let's save that discussion for another time). One notable exception to the weaker pay has been the home construction industry. These jobs have been relatively high paying. The sector has been a major source of new job creation, from real estate agents to mortgage brokers to Loews and Home Depot.

It should come as no surprise that as the entire sector has cooled, so too has the jobs creation associated with it. We now have the biggest inventory of new and existing homes for sale we have seen in nearly a decade. Realtors have said that home sales are now a 'buyer's market'. New home builders are witnessing the rise of a Ghost Housing Market, where specualtors walk away from their down payments, rather than close on a property which has declined significantly in price.

Tip to this blog via email from my friend Hale Stewart.