It’s inevitable that once one issues a forecast, it is almost immediately disproved with current information:
As part of my 2009 forecast, I saw California unemployment rising to 11.5% by year’s end. That single tidbit is likely to be proven wrong, as it is obviously too optimistic in the light of what the BLS has offered today. Their estimate of regional and state unemployment weighed in at 11.2% for California. At the rate we are bleeding jobs, that’ s not likely to be the end of it. Besides, employment typically lags tops and bottoms of business cycles, so even if the recession were over tomorrow, we’d likely blow through the 11.5% rate. Though, to be fair, 11.2% is already a record, so it’s hard to predict what will happen next.
Over the last year, Caliofornia has lost some 637,400 (est) jobs. In Feb 2009, the rate of unemployment stood at 10.6%. There is no pricing pressure (except downward) on houses with job losses like this. We have now left the barn of bubble-delfation driven price decreases, and have now entered into the economic eqilibrium impacts that job loss creates. The number of jobs in California now stands at 14,474,700. March of last year the state reported 15,112,100 jobs.
Due to the relationship of jobs to inflation, it is unlikely that absent even more massive money creation, business or homes will have any pricing power in 2009.
At present course and speed, and assuming some moderation of the the the rate of increase, I’d say it’s likely that we exceed 13% unemployment in 2009, and that California is still receeding economically until 2nd half 2010 or so. (The national recession, I believe, will end sooner than that at the end of this year or early next year.
Though, to be fair, 11.2% is already a record, so it’s hard to predict what will happen next.
i just held my tongue because I saw this coming. Interestingly unemployment can’t get above 14% or so because people will be dropping off the official roles before enough new people lose their jobs.
Not only are we going to run out of buyers but these unemployed will be years rebuilding their finances further reducing the supply of potential buyers.
Like I said, not surprised.
I’ll bet the government is pretty glad that the BLS neutered the unemployment metric in the Clinton era to exclude long-term unemployed (who are just as out of work, but for longer), otherwise the numbers would look even more accurate. It’s going to be hard enough trying to explain how the Colossal Waste Bailout TARP Bills, followed by the Colossal Waste “Stimulus” Bills, followed by the Colossal Scam Waste PPIP, followed by whatever other disasters await in the next six months caused unemployment to rise above 10% nationally; imagine the spin required if the numbers included all the unemployed people!
Of course, the real interesting test will be years later, when the economy has eventually worked through all the idiotic attempts to stifle actual recovery (Japan took 15 years, unknown time-frame for the US). Then, we’ll get to see if California’s oppressive business environment has an effect on where new businesses are created (after the talent pools and industries have had some time to relocate as desired to make ends meet during the recession), and if it’s able to grow employment at above or below the national average. I hope I’m long out of the state by then, but I’ll still be curious to see what happens.
Chuck P,
I thought almost all of your 2009 prediction was too optimistic, and especially the unemployment numbers. The fact is, you are there in SoCal and I am way far north. So your word have more weight than what the local papers say (OCR, pffff, right) I would think.
I have jumped on the Peter Schiff, Gerald Celente and even James Kunstler’s (kind of) bandwagon. After the many recent episodes within this period of crucial world history
So I am pent up in doomsdayville and your post caught me off guard. California, even without the housing bust, has a way to go before they level off, I believe.
For the record, I am similar to Patrick Killilea (without the blog). I am a not professional in the financial or housing market in any way. Like Patrick, I am a programmer (and sometimes analyst for the AK DOL if that has ANY weight) that decided not to buy in SoCal for many reasons. And have been watching pessimistically ever since.
Your blog keeps me looking into the trenches of the place I abandoned.
Thanks for keeping us informed.
I think unemployment will moderate. My guess is that people will begin to flee California, just like they piled in over the last 15 years.
My guess was a large number will return to the midwest and Mexico.
Potential long term deflationary trends
1)Hostile business environment
2)Resource shortages:water
3)High crime
4)Dropping number of college graduates
5)Environmental crazies in government
6)Mexicans leaving and those that stay. A pox on us all.
Still, the incentives, tax adjustments, additional funny loans… extending the bad loans to new self destruct dates. Could easily drag the price declines out for another decade near the beach.
I hope I’m wrong.
Welcome back,
James
A number of years ago the government changed the way they report unemployment statistics.
The true unemployment rate is much higher than the figures touted by the media.
The govt. removed people who had been unemployed for longer than approximately 6 months. Their rationale is that anyone who does not have a job after 6 months does not want a job, so no reason to count them any longer.
They also do not count the underemployed, part-time workers etc..
People who cannot find a job in their desired field of employment who take a job as a waiter, valet or dog walker etc.. are not counted either.
If you want to dig through the govt unemployment report you can add back what they remove to come up with the actual unemployment rate.
We are really around 15% unemployment.
http://www.bls.gov/news.release/empsit.t12.htm
http://www.financialweek.com/a.....ilyAlert01
Just a quick laugh Chuck. I remember Obama looking at taxing windfall profits not so long ago. These banks will have loans to write off for 5+ years. Could be the same for dozens of others.
Deflation abounds.
Those windfall profits/taxation propositions were directed at the oil industry, especially when we had 140+ dollar barrels last year.
What was humorous about that was Obama (or anyone) could not define what a “windfall profit” was. If you wanted to compare profit by percentage, well Google and others had the oil companies beat. Net profit gain?; health care & pharmaceuticals beat oil companies there. So if you were to tax on “windfall profits” you would have to roll in the other industries or companies.
So it never happened.
wow . nice to see someone being optomistic . i believe we have much further to go ! we will see !