Housing Prices Sink as Consumers Mixed on Jobs, Economy

Even as American consumers were opening their wallets, they were telling The Conference Board they just weren’t very optimistic about 2011. The organization’s Consumer Confidence Index declined in December to 52.5 from November’s revised 54.3.

According to Bloomberg News, the decline was greater than the most pessimistic forecast of the economists it surveyed.

Some analysts viewed the decline with more than a little skepticism, considering the surprisingly robust sales numbers that are starting to come in.

MasterCard Advisors’ SpendingPulse reported that consumer holiday spending on everything but cars was up 5.5 percent over last year. The total for the 50-day period ending Dec. 24th was $584 billion, making it the strongest holiday season since 2005.

The University of Michigan/Thomson Reuters consumer confidence survey showed improvement in December, though most of the measures were close to where they were at the end of last year. Only the Current Conditions Index showed marked improvement, rising 9.4 percent over where it stood last year. Still, the report said, “Consumer confidence improved in December to its best level in six months and its second highest level since the start of 2008.”

Much of the difference in the two confidence surveys can be traced to opinions on jobs. The Conference Board found consumers more pessimistic in December about future job prospects. Those saying jobs are “hard to get” rose to 46.8 percent from 46.3 percent in November. But the Michigan survey reported, “Consumers reported much more favorable news about recent changes in the job situation, and more frequently expected the unemployment rate to decline during the year ahead.”

Meanwhile, the closely watched S&P/Case-Shiller 20-city composite home-price index said housing prices dropped 1.3 percent in October, for an annualized decline of .8 percent.  The decline was larger than the average in a survey of economists with six cities — Atlanta, Charlotte, Miami, Portland, Seattle, and Tampa — at their lowest levels since the bottom began falling out of the market.

“The double dip is almost here,” warned David M. Blitzer, chairman of the index committee at Standard & Poor’s. “There is no good news in October’s report. Home prices across the country continue to fall.”

The continuing decline in home prices has ramifications for recruiters who already have had offers turned down by candidates with underwater houses. Jason Warner discussed the impact of no equity and negative equity home ownership on candidates as recently as November, noting that “‘Go Local’ has become the strategy du jour.”

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Challenger, Gray & Christmas, the global outplacement firm, reported that just 6.9 percent of job seekers who found jobs in the third quarter of 2010 relocated. In the same quarter in 2009, 13.4 percent relocated.

“The relocation rate has been low for four consecutive quarters,” the firm said, “averaging just 7.3 percent since the fourth quarter of 2009. The 6.9 percent figure in the quarter ending September 30 was the lowest ever recorded by the firm, which began its tracking in 1986.”

In a LinkedIn discussion on relocation a few months ago, Rob Dromgoole summed the situation up this way:

“2007 = high house values, relocation was much easier.

2010 = much more difficult due to low real estate values. Can you sell a role if someone loses money in a move? That’s tough.”

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

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4 Comments on “Housing Prices Sink as Consumers Mixed on Jobs, Economy

  1. James Surowiecki of The New Yorker just wrote a very interesting article discussing “cyclical” vs.”structural” reductions in employment.
    ……………………………………………………

    http://www.newyorker.com/talk/financial/2011/01/03/110103ta_talk_surowiecki

    The Financial Page
    The Jobs Crisis
    by James Surowiecki January 3, 2011

    Keywords
    Unemployment;
    Recession;
    Jobs;
    Beveridge Curve;
    Barry Bluestone;
    Recovery;
    Economy

    The recession has been over for more than a year now, but so many people are out of work that it doesn’t feel like much of a recovery. In November, the economy added just thirty-nine thousand jobs. The failure to translate G.D.P. growth into job growth has given us an unemployment rate that remains near ten per cent (twice what it was in 2007), and has swelled the ranks of the long-term unemployed.

    Why have new jobs been so hard to come by? One view blames cyclical economic factors: at times when everyone is cautious about spending, companies are slow to expand capacity and take on more workers. But another, more skeptical account has emerged, which argues that a big part of the problem is a mismatch between the jobs that are available and the skills that people have. According to this view, many of the jobs that existed before the recession (in home building, for example) are gone for good, and the people who held those jobs don’t have the skills needed to work in other fields. A big chunk of current unemployment, the argument goes, is therefore structural, not cyclical: resurgent demand won’t make it go away.

    Though this may sound like an academic argument, its consequences are all too real. If the problem is a lack of demand, policies that boost demand—fiscal stimulus, aggressive monetary policy—will help. But if unemployment is mainly structural there’s little we can do about it: we just need to wait for the market to sort things out, which is going to take a while.

    The structural argument sounds plausible: it fits our sense that there’s a price to be paid for the excesses of the past decade; that the U.S. economy was profoundly out of whack before the recession hit; and that we need major changes in the kind of work people do. But there’s surprisingly little evidence for it. If the problems with the job market really were structural, you’d expect job losses to be heavily concentrated in a few industries, the ones that are disappearing as a result of the bursting of the bubble. And if there were industries that were having trouble finding enough qualified workers, you’d expect them to have lots of job vacancies, and to be paying their existing workers more and working them longer hours.

    As it happens, you don’t see any of those things. Instead, jobs have been lost and hiring is slow almost across the board. Payrolls were slashed by five per cent or more not just in the bubble categories of construction and finance but also in manufacturing, retail, wholesale, transportation, and information technology. And take hiring: one of the industries that have been most cautious is the hotel and leisure business. Needless to say, there’s no shortage of people with the skills to be maids or waiters; there just isn’t enough work. Another sure sign of weak demand is that people with jobs aren’t deluged with overtime; hours worked have barely budged in the past year.

    Believers in the structural argument refer to something called the Beveridge Curve, which measures the historical relationship between job vacancies and unemployment. They argue that the curve currently shows more job openings than there should be, given the current unemployment rate—implying that businesses are having a hard time finding qualified workers. But a careful analysis of Beveridge Curve data by two economists at the Cleveland Federal Reserve shows that it’s behaving much the way it has in previous recessions: there are as few job vacancies as you’d expect, given how desperate people are for work. The percentage of small businesses with so-called “hard-to-fill” job vacancies is near a twenty-five-year low, and open jobs are being filled quickly. And one recent study showed that companies’ “recruiting intensity” has dropped sharply, probably because the fall-off in demand means that they don’t have a pressing need for new workers.

    Don’t expect the structural argument to go away, though. It’s a perennial: nearly every recession leads pundits to proclaim that the job market is facing structural challenges, and that higher unemployment is here to stay. During the 1981-82 recession, now seen as a classic cyclical recession, the economist Barry Bluestone warned that, as a result of structural issues, there might not be “much recovery in terms of overall employment in the United States.” Yet, by 1984, unemployment was back to where it had been before recession hit. A 1964 survey of economists found that more than half believed structural issues were playing a significant role in limiting the number of jobs; three years later, unemployment was below four per cent. And, during the Great Depression, even F.D.R. thought that unemployment might well be stuck at a permanently higher level. Recessions are, among other things, crises of confidence, and one manifestation of lack of confidence is the conviction that this time we’re not going to be able to climb our way out.

    Structural issues aren’t irrelevant, of course; there are certainly plenty of construction workers who are going to have start plying a new trade. But what defined the recent recession was the biggest decline in consumption and investment since the Depression. Dealing with that is the place to start if we want to do something about unemployment. The structural argument makes government action seem irrelevant. But if we don’t do more to get the economy back up to speed, it won’t be because stimulating demand won’t work. It will be because we’ve chosen not to do it. If we can’t find the way, it’s because we don’t have the will. ?

    Read more http://www.newyorker.com/talk/financial/2011/01/03/110103ta_talk_surowiecki#ixzz19SEJLgJ6

  2. Housing is still the biggest deterent currently for professionals that want to make a change. We have tended to focus on the local or renting candidates because of the problems that people are facing with current home values. Even though many are not “underwater” they still don’t want to make a move because they feel they have lost potential equity. The landscape has changed and it will be, in my opinion, a long time before we see a shift in the housing market where people will feel that 2 or 3 % increases is the new normal for housing values. Many areas will remain flat because the housing prices grew way beyond any real value because they were driven up by speculation of great profits. This will take time to correct and I see it as a long term issues for getting the “critical” openings filled.

  3. Speaking of housing, let me state the situation as directly as I possibly can – we ain’t seen nothing yet. While much of the first collapse cleansed the system of quite a few buyers who over-bought, there are still too many of those owners to allow the market to realize much of a rebound. As maintenance expenses continue to accumulate for owners who don’t have the funds needed to pay for the maintenance, I think we’re going to see another wave of walk-aways.

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