Economists at Bank of America Merrill Lynch say one key to a jobs recovery is an improvement in housing -- because so much job creation is driven by new businesses that have in recent years been financed in part by home equity borrowing.
This sort of job creation has been missing the last couple years, thanks to the housing crash. If U.S. house prices embark as expected on a new decline, the long-awaited hiring renaissance could be put on hold yet again. _Fortune
... a disproportionate amount of job creation comes from new business start-ups, which of course typically at least start small. Start-ups account for just 3% of overall employment but 20% of new jobs in any given year, according to Meyer.At the low end of the housing problem, the US is experiencing an epidemic of homelessness. With a steady growth of structural unemployment, fewer people are able to maintain mortgage payments -- or even to make rent payments.
When that engine sputters – as it has in recent years, with tight credit and consumer belt-tightening – it robs the economy of one of its driving forces.
..."We have bad news for an awful lot of people, but it's a Goldilocks economy for stocks," said Keith Springer, a financial adviser in Sacramento. "The Fed is trying to create a bubble of artificial demand to create the wealth effect. It doesn't do much for jobs, but for now it's pretty good at driving stock prices." _Fortune
US housing is in fact on life support. This is the 53d month of housing value declines in the US -- exceeding the number during the great depression of the 1930s.
There is nothing in either President Obama's or Paul Krugman's bag of big government tricks which can possibly turn this economic farce around. While Obama's allies continue to hope for another Oklahoma City bombing or 9/11 attack in order to improve the president's poll numbers, the real economy (not the stock market) and real people continue to suffer in ever larger numbers.
One day you will wake up to find that 100% of US tax revenues are going to pay interest on the national debt. If you have waited until that day to begin preparations, you will need to begin practising your extreme yoga immediately ;-).
And to imagine, the situation in Europe is actually worse than in the US. The rest of the world actually still needs Europe and the US as export markets -- despite all the excessive protestations to the contrary. Interesting times.
14Jan11 More: Mish provides a very interesting look at the extreme contortions undergone by Obama and the Fed in claiming to have created or saved millions of jobs, and having reduced the "unemployment rate." The reality is certainly not the same as what you are being told by your president-for-life.
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