Pink Slips Proliferate in November
- Dec 05, 2008
The magnitude of the unemployment numbers–533,000 jobs evaporated in November, according to the Department of Labor–took economists and analysts by surprise this morning. A Reuters survey of such observers had predicted a loss of 340,000 jobs for the month. It’s the highest monthly total since 1974. The current unemployment rate, after figuring in the latest surge of job losses, is now 6.5 percent, the highest since 1993. Some calculations put the “real” unemployment rate much higher, perhaps twice as much, by including able-bodied adults who are so discouraged that they’ve giving up on finding work and are presumably spending their days watching Dr. Phil.In any case, as a matter of comparison, worse moments in U.S. employment–much worse in one case–have included: mid-1933 (25 percent); May 1975 (9 percent); and January 1983 (10.4 percent). The increase in unemployment is bound to further impact commercial real estate markets, some more immediately than others. Retailers and retail landlords will undoubted feel the pinch even more than they already are, and the demand for distribution space will also drop as fewer consumer goods move through the system. The nation’s office markets, which have been sluggish for a while now, will continue to soften. Calls for another stimulus package, different in character from this spring’s free money for consumers, are growing. “Near term, a stimulus package focused on infrastructure is critical for resuscitating growth,” posited Peter Morici, professor at the Robert H. Smith School of Business of the University of Maryland, in his weekly newsletter. “The recent round of tax rebate checks ended up in savings accounts or spent at the Wal-Mart on Chinese goods, and did little to create jobs or accelerate growth. Whereas projects to repair roads, rehabilitate schools and refurbish public buildings would create high-paying jobs at home and provide a legacy in capital improvements that assist growth now and in the future.” The Mortgage Bankers Association reported today that nearly 7 percent of all U.S. mortgages are behind 30 days or more, with 2.97 percent of all loans already in foreclosure. “Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based organization, in an interview with Bloomberg. Previous recessions didn’t seem to impact carriage-trade residential real estate, but this time around, with billions and billions worth of upper-bracket paper wealth having evaporated recently, developers of high-priced dwellings are poised to suffer unfamiliar pain. Such as Donald Trump, perhaps. The Donald has filed a countersuit against a creditor on the sales-challenged Trump International Hotel and Tower project in Chicago, as part of an effort to avoid paying the $40 million he personally guaranteed to Deutsche Bank on a construction loan for the project. The bank is suing Trump to get him to pay up. Trump cited “force majeure” as the reason sales have tanked on the project: that is, the economy has gone unexpectedly bad for reasons beyond his control, so he doesn’t have to pay up. In fact, he wants Deutsche Bank to pay him damages for “damaging his reputation.” We can only hope the judge gets a smile out of that one.