The Reckoning

"The U.S. jobs market appears to be at a turning point" per an MSNBC column today.

As I look through these numbers I'm baffled about how anyone can put a finger on such a widely moving target. Right now the overall unemployment rate is 9.7% nationally (in some locations it's as high as 15 %) and everyone in the Obama administration feels good that it's not as high as they thought it was going to be. Yet they say that more people are going to start searching for a job again and that will make the unemployment rate spike beyond 10% nationally. So how can you EVER say what the national unemployment level is? The truth is that you're only counted if you're still considered "actively unemployed".

"The "official" jobless rate represents the number of unemployed workers as a percentage of the work force, as measured by a survey of households. But to be counted in the work force, you have to be actively looking for a job. (Officially, “actively” means at some time in the past four weeks.)" - MSNBC.

So in short, you're no longer considered "Unemployed" if you stopped looking for a job. But what if there are no jobs to look for? The real estate job market in 2009 - 2010 has been a barren waste land and because there are no jobs our government is basically considering everyone in this industry as "NON-Unemployed" thus dropping the overall unemployment rate nationally. This is the sycophantic nature in which our government is conducting it's head count and it has to end. Yet every week stocks go up and stocks go down based on this bogus number.

The truth from my desk is that anyone that is currently laid off, whether you received a severance or not, is U-N-E-M-P-L-O-Y-E-D . If you had a job and lost it in this recession you are U-N-E-M-P-L-O-Y-E-D. Sorry for the phonetic spelling but I just wanted to make it as easy as possible for them to understand should this happen to land in their email box.

For the real estate market we are at an absolute impasse until something can be done about the distressed asset and commercial mortgage situation. The FDIC is set to shut down twice as many banks this year as it did last year yet the assets seized by the FDIC are in limbo between the banks and the contract asset managers CBRE and Prescient. Banks are holding out to sell these properties for top dollar at a time when values continue to drop. Meanwhile existing banks won't underwrite construction loans unless they have a massive "Personal" guarantee. All this does is stop progress. What developer is going to risk all he/she has for a construction loan? Yet, the lack of the loan means a lack of job growth.

The Administration needs to push the existing banks to come up with lending programs that they and their prospective borrowers can live with. At least create a means for forward progress. Obama wants to push a 30 billion dollar lending package for small business to the banks but rest assured without oversight these banks will use the cash to shore up their own hemorrhaging. Plus the qualifications for the loan as we addressed above is so out of whack very few could ever qualify.

This year I felt that a lot of our clients have a finger on the pulse of this market and have solid game plans about how to profit from the market but they're all stuck at the starting line because failed banks have yet to fully dispose of their assets,  existing banks are failing to lend money and apparently our administration has more on it's plate than it can fully comprehend. I'm not saying that the administration isn't working hard on all fronts but for some reason the cloak and dagger response to our nation's largest unemployment level in decades is the big elephant in the room at their cocktail parties.

In the mean time I read articles about the ever moving unemployment rate and how "things are getting better" all the while our client roster continues to cut jobs just to survive. There is an epic spin machine in Washington D.C. that's more concerned about votes in November than really trying to find solutions to the job market.

I am not for the over involvement of government in our daily lives but the Federal Government sits right behind the trigger button for the real estate economy and they don't even seem to realize it.

There will be a reckoning in November.

Kipp Gillian - President
Gillian Executive Search, Inc.