Friday, June 20, 2014

Beyond The Numbers


We have received some good news over the past few months regarding employment growth. The creation of jobs is the most important function of the economy. When people can find jobs, this creates confidence. When people are secure in their jobs they tend to spend more. This includes large purchases such as houses and cars. Of course, the real estate sector is another huge factor within our economy. So, the next question is--how good are the job numbers? Here is the good news, May represented the fourth consecutive month of jobs gains over 200,000 and that is the first time that has happened since 1999.

On the negative side, the labor participation rate was 62.8%, which was unchanged from April. This is the lowest rate in decades. We do understand that this number is affected by the number of people retiring and with baby boomers aging there are record numbers retiring. But it is also affected by the fact that the population has been growing. A few weeks ago, we pointed out that the population growth of our country may be poised to present us with a housing shortage in the future. Well, it also means that we must create more jobs than ever before and that has not happened yet.

We lost 8.7 million jobs during the recession. Again, the good news is as of May these jobs have been recovered over the past four years. That is a rate of approximately 180,000 jobs per month. We are now creating jobs at over 200,000 per month. If we can create jobs at a rate of 200,000 to 250,000 per month this would appear to help us catch up with population growth in a few years and lower the unemployment rate further. We believe as more people obtain gainful employment, they will spend more money and this will spur housing and other sectors of the economy which will create more jobs. That is what a virtuous cycle is all about and that is why this "200,000" number is so important.


Mike Ervin
Branch Manager/Mortgage Loan Officer
NMLS: 282715
W.J. Bradley Mortgage Capital, LLC
O: 650.735.5261
C: 650.766.8500


Wednesday, June 18, 2014

No More Excuses

Over five years ago we suffered the worst recession since the great depression almost 100 years ago. Since then our economic recovery has been the weakest of all recoveries as well. There are many reasons for the weak recoveries. The fact that our real estate market was devastated and needed years to recover was certainly a main factor. But there were other reasons for the stops and starts which were external. We had domestic and world-wide natural disasters from hurricanes and super storms to tsunamis. We will not get into a debate as to whether global warming is causing these extreme weather events but we will acknowledge that they were very, very extreme and caused major damage to populations and property.

There were events that were not weather related, of course. There was the fiscal crisis in Europe and political crises at home. We had wars being fought and terrorist events. Many of these events prolonged the recovery and made us wonder whether we would suffer a double dip recession, which never came. 2014 has certainly not been smooth sailing with our famously cold winter and the crisis in Ukraine. However, we believe our economy has recovered to the point that we no longer talk about slipping back in recession. The drop in the economic growth in the first quarter is a testament to that confidence. Economists shrugged off the down quarter almost universally. So what comes next?

The sun is shining and there is no more cold winter. We are running out of excuses for the economy being so lackluster during a recovery period. The employment report released on Friday showed continued progress in that regard. The last two months has seen a significant pickup in hiring but the employment report also shows how far we need to go. We have recovered all the jobs lost during the recession, but accounting for population growth during the past six years, we have seven million jobs to go. Economists surveyed by CNN/Money indicate that it would take two years or more at this pace for the unemployment rate to reach 5.5% and wage growth is still anemic. The good news? A slow recovery continues to support low interest rates and hopefully the Federal Reserve Board agrees with that assessment when they meet shortly.


Mike Ervin
Branch Manager/Mortgage Loan Officer
NMLS: 282715
W.J. Bradley Mortgage Capital, LLC
O: 650.735.5261
C: 650.766.8500