Unemployment and Our Industry
Last week the Bureau of Labor Statistics released the current unemployment figures stating that unemployment in November had dropped to 7.0%, the lowest rate in the past five years, this was down from 7.3% in October.
With no intention of being political, the above 7.0% figure was put forward by the media, this administration and many economic and industry analysts as clear indication that our economy in full recovery mode. Many in the escrow, mortgage and real estate industry have taken this position by pointing to the “turnaround” in our industry over the past several years, using gains in home sales and prices, and also looking to the record setting heights in the stock market as evidence.
A further look at other labor statistics should give a slight pause as to the real lost potential for our industry if all was truly well. Between December 2005 and November 2007, the two years prior to the economic decline and the “Great Recession,” the unemployment rate never rose above 5.0%, and for the full ten years prior (from November 2003 to 2013) it never rose above 5.8%. Between June 2004 and June 2008 unemployment rates of 5.5% or lower were the norm, with rates dropping to as low as 4.4% on several occasions.
The 7.0% rate actually equates to 10.9 million people unemployed, this figure only includes those currently receiving unemployment benefits. There are another 7.7 million listed in November as being employed part-time…unable to find full-time work. Estimates for the number of people unemployed and totally out of the labor force, meaning they no longer receive unemployment benefits and therefore are no longer counted as officially unemployed, varies from the current 2.1 million officially to perhaps two to four times that number.
When combining each of the previous categories (officially unemployed, under-employed, unofficially unemployed), what is the real unemployment rate? Depending on their sources, some economists and analysts put this estimate between 11.5% to as high as 15% or more. Our current Labor Participation Rate is 63%, in October it fell to 62.8%, this is the lowest labor participation numbers if nearly 35 years.
One commentator pointed out that the 10.9 million officially unemployed is a little more than the combined 10.3 million people living in the cities of Los Angeles, Chicago, Houston and Philadelphia. Now consider if the economic impact of those three cities were eliminated from the national economy, remember, consumer spending drives 70% of national economic activity.
Those true unemployment numbers thus represent an enormous amount in lost revenue and financial wellbeing for our industry, as well as for our national economic health.