Unemployment Digs In Its Heels
Unemployment of over 10% will continue for the foreseeable future. In addition, some job losses will be permanent. The January 12th Wall Street Journal published a list of industries that have permanently shed jobs. I don't think the results will surprise anyone.
Construction job losses ranged from 20% to over 40%. Most of those folks won't be finding work in construction for a long time - if ever. I guess I was surprised as just how many categories of jobs there were in construction and the degree of job loss here. Quite frankly, it's massive. Add to this the fact that many construction jobs were held by illegal immigrants. Their job losses are not recorded in government statistics. So real unemployment is even higher, although I assume a percentage of the illegals have returned to their home countries now that there's no work. On the other hand, we have no way of knowing exactly how this is playing out.
It looks as though unemployment has dug in its heels and will be with us for quite a while. You can expect the residential housing industry to either stay flat or continue to decline this year, as many Americans face re-sets on their adjustable rate mortgages. This will result in both increased foreclosure proceedings as well as people simply turning in their keys to banks who hold their mortgages. While unemployment will make meeting the increased mortgage payment difficult, if not impossible, the fact is that more people walk away from their homes when the principal of their mortgage becomes greater than the equity in their homes. The term used is that their homes are "underwater." So even if programs are created to re-structure the payment schedules of these mortgages, many people won't take advantage of that program and will simply walk away.
Now add to this the fact that commercial real estate will crash this year. It will get ugly over the next 12 - 24 months - certainly not the sort of environment that will generate a lot of new construction.
It wouldn't be so bad if there were manufacturing industries that could absorb these unemployed construction workers (with a little re-training, of course). But while much of our manufacturing grew with the construction industry, a lot of other manufacturing jobs were lost to other countries. We didn't feel it that much, because of the real estate construction boom. Now we'll be feeling it for a long time to come.
In addition to industries that have and will continue to shrink, the report also lists what's looking good: anything related to health care and government. With the population aging, health care and custodial services for old folks look like winners. Older folks need increased medical care due to the normal process of aging, as well as people and places who will take care of them, due to the fact that many families no longer take of their old folks. That task has become one that "society" must bear - you and me.
(Of course, if you do take care of your mom and dad or your grandparents, be aware that your tax dollars will still fund the care of elderly Americans whose families do not take care of them - in addition to, of course, those who have no one to take care of them.)
Finally, government jobs are growing - at the Federal level, rather than the State level. States and local municipalities are just starting to report their numbers and things look pretty bleak. With declining revenues, they may be forced to lay off workers. Not the Federal government, though. They're hiring - and paying well, I might add. The number in this report don't really reflect this, because they lump government jobs into one category, but that's what's going on nevertheless.
So the world as we know it - for the foreseeable future - will consist of lots of us without a soruce of income or without a secure source of income - not a scenario that lends itself to lots of home purchases. Unemployment for millions of Americans will be a part of our world - maybe for years to come.
What could change things? A surge of entrepreneurial activity that creates new jobs. We'll have to see if we Americans still have the creative juices to help turn the tide. We'll also have to see if government can control its tendency to get in the way.
Construction job losses ranged from 20% to over 40%. Most of those folks won't be finding work in construction for a long time - if ever. I guess I was surprised as just how many categories of jobs there were in construction and the degree of job loss here. Quite frankly, it's massive. Add to this the fact that many construction jobs were held by illegal immigrants. Their job losses are not recorded in government statistics. So real unemployment is even higher, although I assume a percentage of the illegals have returned to their home countries now that there's no work. On the other hand, we have no way of knowing exactly how this is playing out.
It looks as though unemployment has dug in its heels and will be with us for quite a while. You can expect the residential housing industry to either stay flat or continue to decline this year, as many Americans face re-sets on their adjustable rate mortgages. This will result in both increased foreclosure proceedings as well as people simply turning in their keys to banks who hold their mortgages. While unemployment will make meeting the increased mortgage payment difficult, if not impossible, the fact is that more people walk away from their homes when the principal of their mortgage becomes greater than the equity in their homes. The term used is that their homes are "underwater." So even if programs are created to re-structure the payment schedules of these mortgages, many people won't take advantage of that program and will simply walk away.
Now add to this the fact that commercial real estate will crash this year. It will get ugly over the next 12 - 24 months - certainly not the sort of environment that will generate a lot of new construction.
It wouldn't be so bad if there were manufacturing industries that could absorb these unemployed construction workers (with a little re-training, of course). But while much of our manufacturing grew with the construction industry, a lot of other manufacturing jobs were lost to other countries. We didn't feel it that much, because of the real estate construction boom. Now we'll be feeling it for a long time to come.
In addition to industries that have and will continue to shrink, the report also lists what's looking good: anything related to health care and government. With the population aging, health care and custodial services for old folks look like winners. Older folks need increased medical care due to the normal process of aging, as well as people and places who will take care of them, due to the fact that many families no longer take of their old folks. That task has become one that "society" must bear - you and me.
(Of course, if you do take care of your mom and dad or your grandparents, be aware that your tax dollars will still fund the care of elderly Americans whose families do not take care of them - in addition to, of course, those who have no one to take care of them.)
Finally, government jobs are growing - at the Federal level, rather than the State level. States and local municipalities are just starting to report their numbers and things look pretty bleak. With declining revenues, they may be forced to lay off workers. Not the Federal government, though. They're hiring - and paying well, I might add. The number in this report don't really reflect this, because they lump government jobs into one category, but that's what's going on nevertheless.
So the world as we know it - for the foreseeable future - will consist of lots of us without a soruce of income or without a secure source of income - not a scenario that lends itself to lots of home purchases. Unemployment for millions of Americans will be a part of our world - maybe for years to come.
What could change things? A surge of entrepreneurial activity that creates new jobs. We'll have to see if we Americans still have the creative juices to help turn the tide. We'll also have to see if government can control its tendency to get in the way.
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