John Mulkey, Housing Guru

Thursday’s report from the Labor Department indicated that first time claims for unemployment benefits unexpectedly increased by 11,000 last week. Most economists had anticipated a slight decline. And in a report from the Commerce Department, retail sales for December fell at a seasonally adjusted 0.3%, also unexpected. The decline was across the board and included some disappointing numbers from auto sales. Retail sales for all of 2009 fell for only the second time on record, exhibiting the largest annual decline ever reported.

Without consumer spending, which accounts for almost three-quarters of our nation’s GDP, and jobs which provide income for consumers to spend, there can be no recovery, regardless of what happens on Wall Street. The numbers reported above indicate how the recession continues to impact the overall economy and how the recovery has yet to begin.

The Housing Guru: The one source for all your housing questions

While the pundits and political leaders are eager to announce the beginning of the recovery, let’s not proclaim victory over the recession just yet. Sure, things don’t seem as bad as a year ago; we’ve survived and so has our banking system. But it’s not time to break out the champagne. We can perhaps offer a toast to celebrate our survival, and then return to the work at hand.

As Lenn Harley pointed out in a recent BLOG POST describing the new “paradigm,” those in the real estate business can’t just rely on positive thoughts to make things happen; we must take action, and do so with a different perspective.

Our country has experienced a Great Recession, and while we avoided the catastrophe some expected, we’ll not be returning to business as usual. Just this past week, and reported in Bloomberg, the International Monetary Fund Director, Dominique Strauss-Kahn, stated that the consequences of this recession will be with us, “for a long time.” And when former Labor Secretary, Robert Reich, was recently asked when the recovery would begin, he responded, “Never.” The economy won’t recover because it can’t return to the old “normal,” but must instead create a “new normal,” from which we will begin to build our future.

So instead of looking for the recovery, we should spend our efforts defining the new economy, and determining how we will create our success in the coming years.

The Housing Guru: The one source for all your housing questions

Many financial “experts” have called for the end of the recession by mid year; and with improving employment numbers, consumer confidence, increased housing starts, and mid year upon us, can we call the recovery now? While I’m not trying to soil the optimism with a bit of dirty truth, let’s examine a few facts.

• Unemployment has climbed to record numbers, and while the government is telling us the jobless rate is “only” 9.4%, by now most are aware that their numbers exclude millions—somehow, according to the government’s formula, you’re not unemployed if you are no longer receiving benefits. Government numbers also exclude millions of others who are underemployed, who are making hamburgers or cutting grass just to put food on their tables. The numbers further exclude millions of self-employed, such as contractors and Realtors® who, according to the Bureau of Labor Statistics, simply don’t exist. With all those taken into account, the real number is now approximately 20% of the available workforce—and the total number of unemployed is still climbing.

• While we recently experienced a slight uptick in housing starts, current production is at a rate of about 25% of the capacity of just 3 years ago—hardly a positive sign.

• But consumer confidence is up, and that’s a good thing, right? While consumer confidence surveys tell us what a few consumers seem to feel about the condition of the economy, the current rise in confidence isn’t being seen at the cash register. Retail is struggling in almost all areas. Consumers may think the economy is improving, but they are still refraining from spending, just in case it isn’t.

• We can further look to the volume of shipping as an indicator of an improving economy. When companies buy and sell goods, trucks and trains are busy. However, that’s not the case today. Rail and truck traffic continues to decline, and thousands of trucks and rail cars sit idle.

• But the real engine of this recovery will be the housing market. When housing recovers, the economy will recover. Millions of jobs are tied to housing; it’s far more than just the construction and real estate industries. And the declines in real estate values have affected far more than the banks and property owners, for housing is a fundamental aspect of the economic engine of our country.

Contrary to some reports, the housing market continues to decline in many areas. Not only is the housing market not improving, it has yet to reach its bottom; and until it does, economic recovery will be a vision somewhere in the distance.

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