Follow Up: The Economy, Recession, and Recovery

Economists are still waxing grim about the new unemployment figures released by the Department of Labor last Friday, estimating current unemployment levels at 8.1%, the highest since 1983. The AP just released a new article with predictions on how we'll know when the economy finally "bottoms out".

The AP looked specifically at 3 markets - housing, jobs, and stocks - and consulted experts on past trends as well as future predictions.

First, the job market.

Economists are predicting that our troubles with the job market are not over. Some experts predict that the unemployment rate will top 9% nationally this year. Some states are weathering this storm worse than others. In my state, Michigan, January figures put unemployment at 11.6% and climbing and predictions are even more dire.

Economists are focused on 1983 right now, but with this year's current prediction of 9% unemployment, we're still sliding in under the December 1982 record of 10.8 percent. Still, it's looking for a silver lining in a very dark cloud that shows no sign of passing overhead any time soon.

Even if the economy does turn around, it will most likely still be a weak market for 4 or more years, based on predictions. In the meantime, Michigan in particular will keep reeling as plants keep closing. According to Michigan's WARN list, a large number of companies are doing mass layoffs or closing plants this season. Many of them are automotive-related, but not all. Personally, two of my local friends got laid off last week and only one was in the automotive industry.

Secondly, the housing market.

It's no surprise to anyone that house values have dropped. In January, they're down 14.8 percent from just a year ago according to the National Association of Realtors. Areas that were previously dealing with the housing boom are harder hit by price drops than Detroit, but that's because we were having difficulties in Michigan before the recession even hit.

The housing market is complex, though. We like to look to history to determine the future, and the Great Depression is often brought up when talking about the current state of our economy. As it relates to housing, home prices fell about 30 percent during the Depression, but the housing market is considerably different now, with more adults owning homes and more urban development affecting the current market.

Regardless, according to the National Association of Realtors, it will take a while for any stimulus to affect housing data.

Thirdly, many economists and industry experts are focused on stock.

The stock market peaked in October, 2007. At this point, it's now less than half the value it was then. Experts agree that the market has survived worse, but many of them were surprised that it fell as far as it has.

As for predictions regarding stocks, we look to the investors to tell us if things are picking up. Investors are watching the markets carefully, waiting for all markets to pick up as well as signs of increased consumer spending, and we're waiting for them to start reinvesting in the market.

This is a follow up to an article I did this past week on the economy and the newly released unemployment rate figures. That article is also available on Associated Content and is linked below.

Sources:

http://www.milmi.org

http://www.realtor.org

http://news.yahoo.com/s/ap/20090308/ap_on_bi_ge/economy_where_s_the_bottom