AS EMPLOYERS SLASH JOBS, Will Real Estate Slump Continue?
FEBRUARY - 63,000 JOBS CUT - HIGHEST LEVEL SINCE MAY, 2003! JANUARY JOB LOSSES FAR WORSE THAN ORIGINALLY PROJECTED.
Often - PERCEPTION dictates REALITY! This could be true in the Real Estate Market here in Chicago, and across the nation.
The U.S. Labor Department statistics released last Friday may confirm the country is either in, or headed to, an economic recession. Despite the fact that the Unemployment Rate dropped in January, from 4.9% in December, to 4.8% the following month, many experts feel than thousands of workers may have become discouraged by the prospects of locating another job, and left the labor force (unemployment figures only include those not working who are actively seeking a new job). The Federal Reserve Board is predicting the Unemployment Rate will jump to 5.3% before the end of 2008.
The Stock Market shed 180 points on Friday, due in part to the unfavorable employment numbers and persistently high oil prices.
President Bush has acknowledged "It's clear our economy has slowed."
Many of the job losses came from manufacturing, construction, and the financial services sector, perhaps directly related to the impact of the credit and real estate market woes. Friday's plans by the Federal Reserve Board to increase by $100 Billion the amount of money it will make available to banks for new loans come on top of and additional $160 Billion made available in T-Bill Auctions since December, 2007.
As the THREAT of continued job losses continue, many workers, fearing for their continued employment, will put off expensive purchases - especially new home purchases. This could further fuel current housing market weakness in Chicago and the suburbs.
Even recent action to slash interest rates by the FED - the 1.25% cut in January was the largest 30-day decrease since the early 1980's - is having little effect. Another FED rate cut is predicted at the next Open Markets Committee Meeting on March 18th. These cuts, along with the President's Economic Stimulus Package, offering rebate checks to U.S. Taxpayers beginning in May, and new tax breaks to business, are predicted to help the economy in the Second Half, 2008, according to Federal Reserve Board Chairman Ben Bernanke.
But improvement, although hoped for, is not guaranteed. The RBC Cash Index, a measure of relative consumer confidence, sank to 33.1 earlier this month. This is the worse index using this benchmark since 2002.
What our Team is seeing locally, here in Chicago and the suburbs, through procrastination and casual conversation, is a lack of confidence by sellers that their selling prices will increase. Buyers see continued price weakness ahead, and they are delaying new home purchases. This seems to be created by the general feeling that the housing market will get weaker before it gets stronger.
Please read Jeannine Aversa's article in Friday's edition of The Chicago Tribune.
DEAN MOSS & DEAN'S TEAM CHICAGO
