A comment on an important economic release this week
This Friday, the Bureau of Labor Statistics will provide a picture of the employment situation in America. This situation report will tell us whether the national unemployment rate has changed. Also, the report will tell us how many new jobs employers created in the nation.
The number of jobs created is important because, for one, new people are entering the labor market each day, and we need new jobs for these people. Also, we need new jobs for the people who are and have been unemployed.
Jobs mean income for the unemployed, and a better possibility of buying a home or refinancing a home. Also, new jobs in the U.S.’s current economy will likely mean an increase in demand for goods and services produced by those already working.
What economists strive for is an unemployment rate of four to six percent, rather than today’s 7.9 percent. We strive for four to six percent unemployment because we believe the economy is healthy with a rate of four to six percent. Four to six percent reflects a regular number of people changing jobs (for example, those leaving one job for a better job).
The report this week will show whether the unemployment is moving closer to a healthy level, staying the same, or moving away from a healthy level. We are all hoping we are moving closer to a healthy level.
If the we are still at 7.9% unemployment, why have housing inventories across the country plummeted so much?
I have a feeling that the government is completely behind the recent surge in housing prices and plummet in inventory.
Joe, government policies have undoubtedly caused this mess and are undoubtedly contributing to our continuing problems.I know a number of people who would be selling IF they had equity. They don’t, they like the neighborhood and their monthly payment is about what they would pay for rent, so they stay. Formally they are owners, they are actually renters.
Thanks Joe and Tom. Joe, you may want to hear from some of the other writers here, like Tom, but low interest rates are probably one reason for the low inventory.
With low interest rates, such as mortgage rates, demand for buying property will rise — because the cost of buying has fallen. I think we have seen this as investors have purchased properties to fix them up and resell them.
Also, as demand for housing goes up, prices will rise, as sellers see an opportunity to earn more from a sale.
And yes, government policies are behind some of these changes. The Federal Reserve System, The Fed, has established a policy of low interest rates to keep the cost of borrowing for you and me low.
The Fed hopes that by keeping the cost of borrowing low, we will borrow more and spend more. Increasing spending is akin to increasing the demand for products and services, and may give companies a reason to hire the unemployed.