Simple Math to Know: No Jobs=No Housing,
No Housing=Bad Economy
Wall Street moves upward nicely during the third quarter earnings report
season as company after company "meets or exceeds" analysts' expectations are
the essence of headlines dominating the finance pages--just as the Rant
predicted would happen in early October.
What the headlines fail to mention is the met or exceeded expectations are
vastly lower than they were in July when the quarter started and none of the
original predictions made at that time are being met now. But that isn't
mentioned in Washington or on the Street because then the populace might know
how they are being fleeced.
Delve into the numbers behind the numbers in a couple of well-established
economic indicators and you find the trouble spots missing from the headlines
that sound a death knell for a long-term recovery.
Today's topics start with the unemployment numbers before heading for the
housing sector.
Wall Street received a jolt when the economy did not generate the expected
184,000 jobs in the delayed September report but only produced 148,000 new
jobs.
This report followed the last Rant topic of high unemployment among youth
and its "lost generation" dimension. Combined the two bleak reports led to
LESS UNEMPLOYMENT.
The explanation is a simple one again, the number of people in the work
force decline by more than the number of people still looking for jobs so the
unemployment rate fell but that does not mean the economy is recovering but
rather the economy is faltering some more as the work force is shrinking.
The drop-out rate in the work force keeps the unemployment number looking
good despite the housing market's woes.
Remember for a moment that the Washington elitists are counting on record
number of young healthy adults signing up for Obamacare or the system sinks
under its own weight. Remember the rising tide of unemployed, uneducated youth
(16-24 years of age) inhabiting the landscape. Now add in the fact the prime
home-acquiring age group (those 25-34 years old) and factor in their
unemployment rate (25%) and you can easily see vicious economic "headwinds" as
Obama euphemistically refers to them.
Combine the above factors with the overlooked statistic that it is not
individuals pushing the housing market's recent gains but investment-prone
businesses looking for a return on investment and you can see the train wreck's
origin.
What's more ominous for the U.S. economic recovery prospects is, in
September, residential housing construction employment fell by almost half. The
builders are seeing a saturated market. The lag in home construction is due to a
market that has over-built once again, anticipating a return to the good old
days only to find out the market that went away during the 2007 meltdown was
indeed a mirage that cannot be recaptured. The new market doesn't have the same
impact because the economy, despite the unprecedented printing press run by the
Federal Reserve, isn't going anywhere, even with Wall Street's announced
successes.
The surge in unemployed and not-in-school youth means this will be a
long-term solution. Remember the two age groups in the study follow closely on
the heels of each other. Both sectors are facing the prospect of a life-long
struggle to get meaningful employment. This means they, in all likelihood, will
never get into the housing market. That's a full generation missing in action on
the economic front. It is a factor that has not yet been built into any economic
model I've looked at.
Toss in the factors the older generation is going to have to work longer to
recover the lost wealth of the recession and the fact many Americans are falling
into the reverse-mortgage lure and there is an economic cornerstone collapse in
the making on two main fundamentals--jobs and housing.
Yet the analysts who should know better try to play down the bad factors in
an effort to keep Wall Street's recovery humming along. Jeff Kolko, chief
economist for Trulia.com, admitted the jobs report is terrible news for the
housing sector. Then he qualifies the sting of what he is saying by ignoring
other factors.
"The economy helps the housing market and the housing market should help
the jobs market but right now neither of those are working like they should.
Construction is still about 40% below normal levels; construction has really
been the laggard in this economy. A lot of young people are still living in
their parents homes. They haven't formed households so there is less demand for
new construction. The final step in the housing market recovery is for young
people to start finding jobs, getting back to work and eventually moving out of
their parents' homes." (1)
How those who have no education will get employed, he doesn't explain. How
having the older set put off retirement stifling a natural flow of open jobs for
the younger citizens to move into will hurt the economy, he doesn't explain. How
having a large sector of the population obtain student debt to get a degree in
an unnecessary liberal arts area but then can't find a job in the real world is
solving the problem, he doesn't explain.
A lot of the unmentioned factors working against a long-term economic
recovery are similar to the problems of balancing the Obamacare books for the
next 10 years. But just because those problems are ignored does not mean they
go away.
The wreck of those two factors should coincide with the displacement of the
dollar as the world's benchmark currency. That collision of reality is not too
far off, a collision that should also demonstrate the lie of the
government-invented "knowledge" factor as a crucial new piece of the GDP.
"I have sworn on the altar of God eternal hostility
to every form of tyranny over the mind of man."--Thomas
Jefferson
(1)--Yahoo Finance, "How the Job Market is Killing
Housing", Oct. 25, 2013
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