Monday, March 9, 2009

The Economy, Recession, and Recovery

Lavalife: Where Singles Click!

Economists are still waxing grim about the new unemployment figures
released by the Department of Labor last Friday, estimating current
unemployment levels at 8.1%, the highest since 1983. The AP looked
specifically at 3 markets - housing, jobs, and stocks - and consulted
experts on past trends as well as future predictions.

First, the job market.

Economists are predicting that our troubles with the job market are
not over. Some experts predict that the unemployment rate will top 9%
nationally this year. Some states are weathering this storm worse than
others. In my state, Michigan, January figures put unemployment at
11.6% and climbing and predictions are even more dire.

Economists are focused on 1983 right now, but with this year's current
prediction of 9% unemployment, we're still sliding in under the
December 1982 record of 10.8 percent. Still, it's looking for a silver
lining in a very dark cloud that shows no sign of passing overhead any
time soon.

Even if the economy does turn around, it will most likely still be a
weak market for 4 or more years, based on predictions. In the
meantime, Michigan in particular will keep reeling as plants keep
closing. According to Michigan's WARN list, a large number of
companies are doing mass layoffs or closing plants this season. Many
of them are automotive-related, but not all. Personally, two of my
local friends got laid off last week and only one was in the
automotive industry.

Secondly, the housing market.

It's no surprise to anyone that house values have dropped. In January,
they're down 14.8 percent from just a year ago according to the
National Association of Realtors. Areas that were previously dealing
with the housing boom are harder hit by price drops than Detroit, but
that's because we were having difficulties in Michigan before the
recession even hit.

The housing market is complex, though.

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We like to look to history to
determine the future, and the Great Depression is often brought up
when talking about the current state of our economy. As it relates to
housing, home prices fell about 30 percent during the Depression.
Regardless, according to the National Association of Realtors, it will
take a while for any stimulus to affect housing data.

Thirdly, many economists and industry experts are focused on stock.
The stock market peaked in October, 2007. At this point, it's now less
than half the value it was then. Experts agree that the market has
survived worse, but many of them were surprised that it fell as far as
it has.

As for predictions regarding stocks, we look to the investors to tell
us if things are picking up. Investors are watching the markets
carefully, waiting for all markets to pick up as well as signs of
increased consumer spending, and we're waiting for them to start
reinvesting in the market. This is a follow up to an article I did
this past week on the economy and the newly released employment rate