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Real Estate Market Commentary - December 2013
by Peter L. Zachary, MAI, MRICS

On Saturday, December 7, 2013, the front page of the New York Times had an encouraging article by Nelson D. Schwartz entitled, “Jobless Rate Dips to Five- Year Low on Steady Gains – 203,000 Jobs are Added – Unemployment Hits 7% - Analysts Point to a Better Outlook.” With a headline like this you don’t have to read the article to understand the gist of the writer. But here it goes, the article stated:

“After years of frustrating fits and starts in the wake of the financial crisis and the Great Recession, the United States economy finally appears to be generating jobs at a healthier, more sustainable pace that many analysts now think will continue into 2014. The official unemployment rate fell in November to its lowest level since 2008.

Employers have hired at least 200,000 workers in three of the last four months, including 203,000 in November. By contrast, as recently as July, when the economy seemed stuck in yet another summer swoon, only 89,000 new jobs were created.

The 7 percent unemployment rate last month – down from its most recent peak of 10 percent in October 2009 – is the best reading since President Obama took office, providing one bright spot for a White House beleaguered on many other fronts. The unemployment rate was 7.3 percent in December 2008, the month before Mr. Obama was inaugurated.

While there is a chance that policy makers will act when they meet later this month, most experts say they believe that Fed officials want to see a little more consistency to the data before they begin tapering, probably early in 2014.

“We consider it a strong report but it’s not something that would cause the Fed to move,” said Michael Gapen, senior United States economist at Barclays. “Our scenario is still March.”

“We still need more evidence that the economy is picking up momentum before we ring the victory bell,” said Julia Coronado, chief economist for North America at BNP Paribas. While the unemployment rate, which counts only people actively looking for work, has fallen to 7 percent, from 7.8 percent a year ago, she said that was largely because of people dropping out of the work force.

Moreover, the current level is well above the 5 percent rate that economists consider closer to full employment. At the current rate of job creation, unemployment would fall to 6.4 percent by the end of 2014, and still be around 5.7 percent in late 2015.

Despite the overall improvement in the employment picture, the situation remains desperate for many American workers and those seeking jobs.

For people with less than a high school diploma, for example, the jobless rate last month stood at 10.8 percent. For African-Americans, it was 12.5 percent, or nearly twice what it was for whites.

Hours after the job numbers came out, one widely followed forecasting firm, Macroeconomic Advisers, cut its estimate for growth in overall economic activity for the final three months of 2013 to just 1.3 percent, compared with 3.6 percent in the third quarter.

“We haven’t gotten to a place where consumers are experiencing solid wage gains,” said Ms. Coronado of BNP Paribas.

More to come next month. Read previous Real Estate & Housing Market News.


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