The economy apparently doesnâ€™t realize this is a season of giving. The latest data present us with two major Grinches. 1) the 0.5% GDP decline in the third quarter has been confirmed and some expect as much as a 6.0% GDP decline in the fourth quarter. 2) Median home prices have suffered the worst decline since the Great Depression as existing home sales dropped 8.6% last month.
What worries me about the duel problems of a recession and a collapsing housing market is that our recovery will be hampered by our workforceâ€™s immobility. If people are stuck in homes they canâ€™t afford to sell, they canâ€™t follow the jobs. And if new industries canâ€™t attract the right labor, they wonâ€™t grow as quickly or may not succeed at all.
This worry is overly negative to be sure, but I do believe that a dynamic, mobile workforce is the key to our success in the global marketplace. When we as a culture started treating one of our most essential commodities (the abundance of quality, reasonably priced housing) as a get-rich-quick investment, we did more than wreck the banking industry. We wounded one of the great advantages of American existence: the ability to get up and go where the money is.
We will recover, but the combination of a recession and a poor housing market will make turning the economy around all the more difficult.