What now? What's next?

Now that the recession is officially over (and actually has been for over a year without us knowing it), what happens next? I'm still seeing stories on a daily basis about how bad the real estate market is in Michigan and in the Detroit area in particular - down again last month year-over-year. Apparently not everyone go the memo that THE RECESSION IS OVER PEOPLE! It's time to star buying homes again.

I guess the fact that about 25% of our population doesn't have a job or are severely underemployed may still be acting as a damper to local real estate sales. Combine that with a mortgage market that, while sporting the lowest rates in decades, is still one of the toughest to qualify for ever and you have the formula for the continued swoon of our local real estate market. FUD reigns supreme in Michigan. There is still Fear of more job loses; Uncertainly about what will replace the lost automotive jobs; and Doubt about the leadership in Lansing having a clue about what to do.

As I talk to people who are working I get an ear full about how hard they are working, because they are now doing the jobs of 2-3 people who were laid off. Companies that are hiring are hiring part-timers, so that they don't have to pay benefits and to allow themselves to be flexible if another downturn occurs (the so-called "double-dip").

Every now and then you hear someone mention that they are in a "recession-proof industry." The health care industry comes to mind; although people also seem to be putting off health care due to lack of insurance and lack of jobs to pay for things. The back end of the health care industry - the funeral homes - may be the only truly recession proof industry. Even there people are opting for the cheapest funerals with rental of caskets for the viewing being hugely popular these days, along with cremation rather then internment.

So, maybe it's still too early to ask what's next. Maybe the better question is really, "When's next?" When are we finally going to get this recession behind us and get on with life. In Michigan that may still be a while. We are a state that has yet to deal with losing a big chunk of our population (their jobs went first and they followed). If Detroit has been characterized as a place with 1,2 Million homes for a population of 800,000, I hate to think what our excess housing overhang is at the state level, but we have to work our way through that inventory before much new building can take place. In the mean time, there are great bargains out there for the few people who are looking, so give me a call.

How'd I miss it?

“Nothing is as far away as one minute ago.” (Jim Bishop). Jim Bishop was a newspaper man. He might be as confused as I am at the report on yesterday's national newscasts that not only is the great recession over; but, it has been over for over a year now. With the great clarity that comes from hindsight, economists are now declaring that the Great Recession ended in June 2009. Wow! How'd I miss that?

Maybe it's the fact that we still have between 15-20% of our state's citizens wandering about like zombies looking for work that now longer exists here. I read in today's paper how one local luxury mall is dong great guns business and how workers at a local auto supplier are all very busy. Of course they're busy; all of the remaining workers are doing the work of 2-3 people, since everyone else was let go.

There are now many scholarly debates going on about what to do to get the economy moving again. I saw a great line in a local newspaper about one of the major issues with housing in Detroit that might apply to this issue, too. The writer said that Detroit has 800,000 people living in an area with housing for 1,200,000 people and that is why there is such a problem with blight and abandoned building. Well if you turn that around a bit and apply it to the job situation; we probably have 1.200,000 people living in an area with 800,000 jobs. And, the lost jobs aren't coming back. The problem is compounded by the fact that most of the people without a job are living in a house that is under water on the mortgage; so they can't even move to find work.

Now there are even articles starting to appear that say, "Gee, maybe we should bring back some of the manufacturing jobs that we shipped overseas." Well, DUH! It's starting to sink in that the Chinese workers that our American companies are paying to manufacture their goods are not running down to the local Walmart to buy those goods. In fact, no one is running down to buy those goods, because the Americans who remain in the area are out of work or fear that they will be soon. But, hey, the Great Recession is over! Celebrate! Just ignore those people with the "Will work for food signs." They're probably slackers. Oh, wait, that's my neighbor...your brother...someones daughter...

It ain't over 'til it's over - Yogi Berra

From a press release by the National Association of Business Economists –

“The Great Recession is over,” according to NABE’s latest survey. “The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines.

The NABE panel upgraded the economic outlook for the next several quarters, compared with the previous survey,”said NABE President-elect Lynn Reaser, chief economist at Point Loma Nazarene University. “Following a sharp 6.4 percent (annual rate) contraction in the first quarter of this year and another 0.7 percent drop in the second quarter, NABE forecasters expect real GDP to rise at an above trend 2.9 percent rate in the second half.

The more-than-three-year downturn in the housing market is very close to coming to an end, with substantial growth (from a low base) expected for next year. According to the survey, the key areas of concern involve the large increases in federal debt and unemployment rates that are expected to remain very high through next year. The unemployment rate is forecast to rise to 10 percent in the first quarter of next year and edge down to 9.5 percent by the end of 2010. (Ed. – In Michigan we are still above 15% unemployment, so we have a ways farther to go to get back to “normal”)

Inflation is expected to remain contained throughout 2010. The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation.”

I have to respond with a somewhat muted “Yea!” to this article, since Michigan is so far beyond the rest of the country in terms of unemployment (over 15%) and still in the top 10 in terms of things like foreclosures. I certainly hope that the rising tide of things getting better elsewhere will raise our boat, too; however, as that great philosopher Yogi Berra said - "It ain't over 'til it's over"

It's too early to tell whether the state’s commitment to attracting “green industries” will provide enough new employment to replace the lost automotive jobs in Michigan. We are becoming a smaller state, with a different employment focus. Let’s hope that the other side of the fundamental re-set that we are going through in our state’s economy provides most with the ability to live well and prosper (or at least afford a place to live).