March 8th, 2011 10:08 AM by Nick Rapplean
“If credit conditions don't continue to tighten and the economy continues on an upward path, we may just find a housing market which can contribute to the recovery before too long,” Keith Gumbinger of HSH Associates wrote a couple of days ago. Sounds like the old expression, “God willin’ and the creek don’t rise”—about the same level of certainty.
But last week’s employment report for February raised almost everyone’s expectations about this economic recovery, so I suppose we should read renewed confidence into statements like Keith’s. We’ll look at that report in a moment.
First, mucho good news: Spending for new residential construction climbed by a very meaningful 5.3% in January. This is the fourth increase in the past five months. New lighter withholding regulations meant more disposable income for most Americans, and personal consumption rose by 0.2%. The Institute of Supply Management (ISM) measure of the health of the non-manufacturing sector rose to 59.7 in February, its highest level since August 2005. And the ISM measurement for manufacturing rose to 61.4 in February, the highest figure since 2004.
All of this is heartening and—though not quite reason to break out singing, “Alleluia, the great storm is over”—it gives us far more confidence in the economy’s current direction. Let’s look at how well the employment report reinforces this confidence.
The key number is the 192,000 new payrolls added in February—a figure that is actually and finally adequate to earn respect in the economic world. (We need 150,000 to 200,000 new job payrolls each month just to do a bit more than jog in place. At or below 150,000, we’re basically creating just enough jobs to give the immigrants and newly-job-ready youth of our nation income-producing work.
Now, we actually need a substantially higher number of new jobs each month to firm the recovery, given how many jobs have been lost during the recession. Note, though, that the December and January new-job figures were revised higher—up 49,000 and 27,000 respectively.
At the same time, the unemployment rate—computed from telephone surveys of American households—fell below 9% to 8.9%. Is that good news, though? The jury is out.
We have 14% more workers on Social Security Disability Rolls. Many of them will stay there, simply dropping out of the jobs market where they might possibly seek jobs if appropriate jobs were more available. Further, the percentage of Americans looking for a job has dropped by 1.8% since 2008. Thus, a lower unemployment rate is the result of fewer people seeking jobs perhaps more than it is of more job-seekers finding employment.
“We’re heading in the right direction but far too slowly to make a real dent in unemployment,” Robert Reich and others have warned. And there’s another problem with the employment numbers. “The big news isn’t jobs, it’s wages,” Reich asserts. In a study, the National Employment Law Project found that most of the new jobs created since February 2010 provide far lower wages than the jobs they’re replacing.
Needless to say, this does not help to build national prosperity and to increase the amount of personal spending by American workers. What’s missing in this picture and how do we fix it?
While you ponder that puzzle, I should say that mortgage rates are likely to remain in their slow-rise pattern, either staying close to where they now are or edging higher slowly. It’s still a very good time to lock in attractive rates.