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Real Estate Market Commentary - April 2011
by Peter L. Zachary, MAI, MRICS

And now for some good news, on April 2, 2011, The New York Times had a front page article entitled "U.S. Posts A Gain of 216,000 Jobs, A Lift for Obama - Private Sector on the Rise - As Jobless Rate Falls to 8.8% White House Warns G.O.P." It stated:

"The United States economy showed signs of kicking into gear in March, adding 216,000 jobs and prompting President Obama to proclaim a corner finally turned. The president and his fellow Democrats pointed to the latest job reports on Friday, and to an unemployment rate that fell a touch to 8.8 percent, as evidence that their policies, like stimulus spending and the payroll tax cut, were working. All of this, they made clear, could become ammunition in their showdown with House Republicans, who have spoken of cutting deeply into the federal budget and have threatened a government shutdown. An emboldened Mr. Obama spoke of the political implications before several hundred workers at a United Parcel Service shipping center in Landover, Md. "If these budget negotiations break down, we could end up having to shut down the government, just at a time when the economy is starting to recover" Mr. Obama told the workers. "So given the encouraging news we received today on jobs, it would be the height of irresponsibility to halt our economic momentum because of the same old Washington politics."

Administration officials hit the same points over and over on Friday. The private sector has added, on average, 188,000 jobs in the first three months of 2011, and 1.8 million jobs since the recovery began. March was the 12th consecutive month of private sector job growth, and the stock market moved slightly higher on the report from the Labor Department. Manufacturing continued its unlikely - if still modest- revival in March, adding 17,000 jobs. Health care added 37,000 jobs in the month and professional and business services added 78,000, although 37 percent of that came from increases in temporary help. The job figures for January and February were revised slightly higher, as well. Yet March's numbers also offered more than a few cautionary signs that the national economy was not cured of all its ills. The ranks of Americans who have been without a job for 27 weeks or more remain painfully high, at more than six million. And the labor force has shrunk steadily since the beginning of the recession, to a point that just 64.2 percent of adults are either in the work force or looking for a job. That is the lower labor participation rate in a quarter-century.

For several months now, economists have expressed hope that unemployed Americans will take heart from signs of new hiring and re-enter the work force. That did not happen in March; the labor participation rate was unchanged. "It is still a very inhospitable market for unemployed workers," said Heidi Shierholz, an economist with the liberal Economic Policy Institute. "We still have five unemployed workers for every opening, and those are desperate times." The average workweek too, was unchanged, at 34.3 hours, and average hourly earnings remained static. Such indicators point to an economy with much slack demand, hints of deflation and little upward pressure on wages. Real earnings, the Brooklings Institution noted on Friday, have fallen 1.1 percent in the last year. "With excess supply of labor at very high levels, it is unlikely that we are going to see any meaningful acceleration in wage rates anytime soon," Joshua Shapiro, an economist at MFR Inc., said Friday morning.

Though the overall unemployment rate has fallen to 8.8 percent - from 8.9 percent in February and a peak from the 10.1 percent in late 2009 - the rate remains especially high for blacks, at 15.5 percent, and for Latinos at 11.3 percent. (In 2007, black unemployment stood at 8.3 percent, and was 5.6 percent for Latinos.) "The first half of this year will be the best job market that we'll see in this whole expansion," said David Levy of the Jerome Levy Forecasting Center. "After that, and looking toward 2012, the situation is questionable." For now, the United States economy weathered last month's global storms and still gained a healthy number of jobs. Austan Goolsbee, chairman of the President's Council of Economic Advisers, sounded content to leave it at that, for now. "We don't totally know the answer" about the effects of global turbulence, he said. "For now, it's a good sign that you had winds in March that appeared to put a hit on consumer confidence and yet that did not slow the engine."

More to come next month.

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