The new normal
Our job market isn’t what the media reports. With our jobless rate reported to be 5.3%, most of the population thinks the job market is rebounding and many people tell me “look at how the economy is snapping back”. Let’s look at reality. So many people have dropped out of the labor force and are now are taken care of by the government that the real unemployment rate is 10.8% ( As of May 2015 ). One could make a case that young workers are not being counted, as those typically in the labor force, the way we used to count the jobless rate, could be closer to 16%.
Here are a few interesting facts:
1. The US shrinking labor force
The percentage of Americans in the workforce – defined as those who either have a job or are actively seeking one – dropped to 62.6 percent, a 38-year low, from 62.9 percent. (The figure was 66 percent when the recession began in 2007.) Fewer job holders typically mean weaker growth for the economy. The growth of the labor force slowed to just 0.3 percent in 2014, compared with 1.1 percent in 2007.
“It is highly unlikely that we are going to see our (workforce) participation rate move anywhere near where it was in 2007,” O’Keefe says.
Yes, for those of us old enough – those are the Jimmy Carter years. More than 93 millions Americans who are eligible to work are not working. In case you are wondering the population of America is 320+ million.
2. Retirement of baby boom generation and younger workers.
What I find interesting about this is the fact that the baby boomers really can’t retire. Many of them have kids still at home because many younger kids are either not working or in school to earn higher degrees so they have a better chance at finding better paying jobs. So these older workers are taking jobs that younger workers used to have. How many of us have seen those workers at local stores and restaurants?
3. Part time workers and Obama Care.
About 6.5 Million part time workers are seeking full time jobs, that’s up fro 4.7 million workers from when the recession began.
The law requires companies with more than 100 employees to provide health insurance to those who work more than 30 hours.
Michael Feroli, an economist at JPMorgan Chase, says this could account for as much as one-third of the increase in part-time jobs.
Those who had good paying 40 hour a week jobs were either let go or had their hours cut to 30 or lower to enforce the new law.
4. Weak pay growth
In theory, steady hiring is supposed to reduce the number of qualified workers who are still seeking jobs. And a tight supply of workers tends to force wages up.
Yet a host of factors have complicated that theory. U.S. workers are competing against lower-paid foreigners. And automation has threatened everyone from assembly line workers to executive secretaries.
This is the area that I find most interesting. How can we have 11.2 million low skilled undocumented workers ( from Pew research in 11/14 ) competing for entry level positions and low skilled labor positions and drive wage growth? People say to me “well Americans won’t do these jobs”. I agree, because they can get government assistance at the highest level than ever. Why work when the government can pay you not to?
How does this effect our housing market?
We will not see rate raise in 2015. The economy is still not strong enough to withstand the rate hike. However we are seeing housing prices in Novi and Northville recover to previous 2005 levels. Why not all areas? See the previous bullet points. You couple those with people who are still getting their credit back together you have a lot of renters. Millennials are shaping a new normal. A large majority of them are not interested in owning. In fact in recent studies they prefer not owning a car or a house. So there is new normal as a result of our latest recession and joblessness.
With rates staying around 4% and fewer properties for sale housing will stay strong. Housing in the stronger name plate areas will continue to raise at 3-4% year over year. Areas that were beaten down like Garden City and Livonia are coming back strong.
Those who are working good paying jobs are comfortable and have been spending money for a year now. So they are buying homes and cars. People are getting used to the new normal which is a larger lower class and upper class and ever shrinking middle class.
We are blessed. Our team has spent more this year on promoting our listings with our 3 billboard locations 96 east bound at Beck and Novi roads and M5 in Commerce north bound north of 15 mile. Our strong presence in Zillow, realtor.com, Trulia and now over 100 other websites are driving more traffic to our homes. Where by us holding open houses for our clients who want them we are seeing increased activity and selling buyers homes. An interesting new normal in real estate is that there is a segment of those who are looking on the internet and shop for a home online. By us having a strong admin team it puts Missie and I in front of people and strongly following up on calls and emails from prospective clients.
If you are interested in moving or buying a rental give us a call.