Martha Randolph Carr Martha Randolph Carr, 3/8/2011 [Archive]

A Kink in the Housing Market

A Kink in the Housing Market

By Martha Randolph Carr

The February US unemployment rate is out and it's a welcomed 8.9 percent with 250,000 new jobs, according to the US Bureau of Labor and Statistics. The high mark of unemployment was reached in the fourth quarter of 2009 at 9.9 percent as we sunk into the Great Recession.

The new number is an even better indicator of the recovery gaining some real traction when it's broken down because the new jobs are coming from the private sector and not government. Local governments, particularly in urban areas, are still trying to dig their way out of deep debt and are cutting jobs. Since the peak in 2008, 377,000 government jobs have been cut nationwide, according to the USBLS.

However, the private sector is where the new jobs have to come from if the recovery is going to have any chance of succeeding. Government, which artificially helped out last summer with the US Census, can't create the recovery. In fact, it won't even be large corporations that pull us out even if they did some of the massive digging to get us into the Great Recession.

It will be the small to mid-size businesses that have always employed more Americans than anyone else and who are now starting to hire again. Money has finally started to loosen up, making it possible for more businesses to access lines of credit and create new products rather than just struggle to stay afloat.

This is all having a wash-back affect on consumer confidence, which has shown signs of improvement.

A lot of the fuel that pushes the economy forward is from perception of how things are trending and once a trend starts to unfold it's difficult to stop or reverse. That's why drastic measures were deemed appropriate at the beginning of the Great Recession when the bottom looked like it could be disastrous and it's good news now as we slowly regain our footing.

However, there are a couple of kinks left that bear watching. One of them is the specter of inflation that is an expected side-affect from so much cash being pushed into the system. The Feds can't ignore the possibility of prices taking off and we've all noticed the creep in fuel and food already. A lot of it can be laid at the feet of the unrest in the Middle East but not all of it.

This would be a great time for Obama to open up more ways for some of the proven 21 billion barrels of US oil reserves, according to the Energy Information Administration, to reach the market, stabilize US prices and head off a serious bubble of inflation. That number does not take into account the Strategic Fuel Fund or the estimated 134 billion barrels that are still unexplored on US soil and water.

The cost of rising fuel, all by itself, can cause a wide ripple effect on prices across the market.

That's where the other kink comes into play. The housing market is the one area where there's a lot of Americans hoping for some heated inflation. Too many homeowners are still underwater or at least have watched their biggest investment lose a significant percentage of its worth. That many not change any time soon because of those same local governments.

Many of the city and county governments are facing a critical point where the bills have come due and there's nothing left to give away or sell in order to balance the budget. They have to do something and there aren't enough benefits or jobs to cut to make things work in the short term, which is generally how politicians work and a good part of the reason we're in this fix at all.

In order to meet government payrolls the local taxes are being raised, particularly on property in urban areas to try and find some recovery after an era of gargantuan spending and not enough saving.

That makes property look a lot less enticing and has the opposite effect on home buyers. They leave in droves and think about living somewhere else like Virginia or Texas who did a better job of reigning themselves in all along, or they stay but hang in there as renters. Condo owners nationwide, in particular, are suffering and may not see any real gain for a generation.

Just to end on a positive note, keep this in mind. The housing market may keep the rest of the recovery from becoming super-heated and leading us like a snapped rubber band into an inflationary period that would hurt just as much as what we just lived through in the Great Recession. If we can maintain a slow, steady recovery we may be able to build a foundation that can last for a few generations till most of the pain fades into the background, once again. Hang in there everybody. Martha's latest book is the memoir, A Place to Call Home. Free eBook at www.MarthaRandolphCarr.com. Email Martha at: Martha@caglecartoons.com.

© 2011 Martha Randolph Carr. Martha's column is distributed exclusively by Cagle Cartoons Inc. newspaper syndicate. For info call Sales at (805) 969-2829 or email Sales@cagle.com.

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