No Quick End to Joblessness

The title of this blog is quoted from The Economist’s FreeExchange, one of the best free sources of macroeconomic information.  The chart below extracts the data out of the narrative.  These forecasts were given during a press conference held by Peter Orszag, head of the OMB for Christina Romer, head of the Council of Economic Advisors. 

Deputy Director of the OMB, Rob Nabors, noted that “in 2010, the administration was focusing on putting Americans back to work.  Then in 2011, when the economy is on a more stable footing, the president will turn his attention to working toward a sustainable budget situation.”  The blog goes on further to say the difficulty in reducing a large budget deficit (around $1.349 for this fiscal year) during a weakened economy.  “one of the primary factors causing current high deficits is the revenue-reducing effect of a weak economy combined with the automatic increase in spending on social programmers associated with the weak economy.  It’s very difficult to balance a budget while the economy is weak, because every contractionary policy move further reduces economy activity, thereby trimming revenues and putting upward pressure on automatic stabilizer spending (potentially deficit spending).”  However, if the deficit does not get addressed at all, “then markets eventually get worried an interest rates rise, choking off recovery”.  The OMB is focusing on cutting the deficit down to 5% of GDP by 2015.  With President Obama only proposing to cut about $2 trillion dollars by 2019, with a $250 billion cut currently in motion with the recent "non-security discretionary spending freeze", and the stable growth projected in the table above, the OMB’s goal of decreasing the deficit to 5% of GDP will solely rely on the strength of the economy (if GDP rises and the budget gap remains the same, the deficit as a percentage of GDP will decrease, thus achieving OMB’s goal but not reducing budgetary gaps).  Furthermore, once defense spending and social welfare programs are stripped out, less than fifth of the budget is left to freeze, which will be counteracted by the jobs bill that President Obama swaying Congress to pass.

For the full article, see Economist Free Exchange link on my side bar. 

NAR GDP Forecast for the next six months

By Danielle Hale, Research Economist

Daily Forecast Update

• NAR's monthly official forecast as of January 5th
• GDP 2009 Q4: +5.7% ↑
• GDP 2010 Q1: +2.7%
• GDP 2010 Q2: +2.4%
• Unemployment rate by the mid-2010: 10.1%
• Average 30-year fixed mortgage rate by mid-2010 2009: 5.6%

Based on the previous news release, I have updated a chart shown on a previous post, labeled under Forecasts, to reflect this new data.

For the full story, visit NAR's website at http://www.realtor.org/research/economists_outlook/quicktakes/quick012910dh?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+RealtororgResearchHeadlines+%28REALTOR.org+Research+Headlines%29

Austin's Job Growth Forecast

Angelous Economics forecasted job growth for the next two years.  By 2010, 25% of local industries are projected to experience positive growth, and by 2011, all sectors are projected to increase.  The following charts show overall job growth and job growth by industry for the past five years including predictions for the next two years.

This table below shows the year-over-year % change in jobs.  Education and Other Services seems to be the biggest industry growers over the past year compared to their five-year averages.  Construction and Manufacturing remain hit the hardest.  Angelous’ forecast shows these two sectors making positive gains in the next few years as home and retail sales improve.  While many experts have given the government credit for aiding in job growth in the area, the past two years additions were similar to the five-year average.  However, the completion of the new federal courthouse and the recent purchase of 700 Lavaca by Travis County will likely require new heads (jobs) to fill the increasing demand for civil services.  Other industries with positive outlooks are environmental services, medical services, biotechnology, restaurants, computer software & services and pharmaceuticals manufacturing per Grubb & Ellis.  They also emphasize healthcare relating to geriatrics and our aging baby-boomer society (77 million total, and that’s only counting the United States).  Not surprising as medical office has been one of the few local commercial submarkets to experience positive gains in rent rates, occupancy, and sale prices.  However, a portion of those gains is due to increase in overall costs in the industry.  

 

If you look at Angelous’ predications, he shows nearly 100,000 in population growth based on U.S. Census predictions but only 26,600 in jobs.  As of 2008, the Bureau of Labor Statistics indicated a national dependency ratio of 96.4 (total dependents divided by total workers multiplied by 100).  Based on the national dependency ratio, it can be inferred that the projected number of jobs will support roughly 27,600 dependents or a total of about  55,000 people.  If Angelous’ population and job forecasts are correct, then the unemployment rate must increase to nearly 10% based on the 22,000+ job seekers added to the market in the next two years (allocated 22,000 within the workforce and 23,000 as dependents).  Pretty shocking conclusions to infer from Angelous’ predictions, but my feeling is that people will not move to Austin unless they have a job.