Tuesday, September 7, 2010

Economic Woes

The economy is still failing- at least, if you measure the success or failure of that sector by unemployment rates, which still stand at over 9 percent. This rate is increasing amongst high-tech skilled workers, who are getting laid off due to lack of work- and then their jobs are being given to younger people fresh out of college. Exacerbating the problem is the fact that many of these jobs are now being sent overseas, where there is a burgeoning job market for these kinds of talents, and where workers will do the same work for less than Americans.

As we know, high-tech positions and workers aren't the only ones being hurt by this recession, but I think there is some credibility to the argument that they are sometimes hurt more than less skilled laborers. If an electrician gets laid off, he can get a job somewhere else relatively easy, even if it isn't electrical. But if there is a drop from somewhere like Hewlett-Packard as a computer engineer to fast food...well, that just isn't good.

But you know, don't worry. Our fearless leader has a plan. He's calling for $50 billion to be put into a new infrastructure fund and for there to be a push to upgrade the roads and railroads of America, thereby creating jobs.

It's about time, if you ask me. Some of the stretches of interstate highway I've seen are absolutely disgraceful. (Still better than some stretches of highway between Lusaka and Livingstone in Zambia, Africa, but still pretty bad. ^.^)

This is one measure I think I could potentially agree with President Obama on. Our road and railroad system is due for an overhaul, and this seems like a good idea. It may or may not be wise during a time of economic upheaval as we're in, but at least it's Constitutional. I also think some of the logic behind the plan, that of hoping to prevent earmarks headed for transportation projects, is good. It might make our lawmakers more focused on important things. Or wait...maybe we don't particularly want that.

In any case (and all jokes aside), at least they're still trying. But there's one area that some are saying shouldn't be maintained, and they should stop trying.

That's the housing market. From this article:
"As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash. When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve."

In the Texas town where I live, house sales are crazy. You drive down a residential street, and you're almost guaranteed to see a house for sale. And these houses aren't selling. They're just sitting there on the market, waiting for someone with enough money to come along.

And as the article above pointed out, despite the billions of dollars the government has pumped into the industry, it hasn't helped. The housing market is still failing. Further, the government insured thousands of loans and credit for mortgages on new houses, and now those people are defaulting, costing us even more money.

Personally, I agree that they should just leave it alone. Experience shows us that oftentimes, when an industry like this goes down, it springs back up soon after. People have to have houses to live in, one way or the other, and they'll continue to buy them, just as they will food or clothes.


suntzusays said...

If you buy most of the explanations for the causes of the housing market crash to begin with, there's a strong case that the government caused it in most ways anyway. More intervention looks like riding to the rescue against evil banks, which is a nice narrative for the cameras and explains why they keep doing it, but its not quite what actually has happened.

My understanding is the the overall real estate markets nationally were up to about 200 on the price level. They average about 110 since WW2, and they're still about 20-25% overpriced from that level, depending on where you are. Texas is probably on the low end because there are fewer land use regulations as it is so you're actually seeing the brighter side of the problem directly. Ohio's been in a protracted slump for about a decade and there have been a ton of foreclosures in parts of town around here. California and Las Vegas and Arizona are probably worse off yet.

Stop propping it up and let the market clear has been my advice for a while now. Cheaper to help people relocate who are underwater in the loan or to do own-to-rent conversions to maintain the property and avoid foreclosures than to keep people in their homes at overvalued prices.

I'm not sure the 50b is much help economically. In fact, I'm positive it will do nothing economically since it is such a tiny amount of GDP. But it might be otherwise worthwhile to update some power lines and traffic lights and fix some roads here and there even if it doesn't do anything else, yes. It will not however "create jobs". There's a long digression into crowding effects for one, but really all it does is move jobs around temporarily and infrastructure projects themselves, no matter how well-intentioned, are notoriously slow to get off the ground because of red tape.

Why they didn't pork-proof the original "stimulus" bill or lay more of this kind of spending in it to begin with is beyond me though.

suntzusays said...

I'm not so sure the high tech productive workers are being replaced and outsourced. Or rather, I'm not so sure that people who are actually productive for those companies are. Specialists do have some issues with structural unemployment, but it's actually not that hard for a high skilled worker to get a reasonably skilled job rather than work at McDonald's because they generally have college degrees. Unemployment for the college educated is still around 5% for good reason. What's killing us structurally is laid off construction and auto workers who don't want to become nurses or customer service agents and not Bangalore taking over high tech fields.

Kiki said...

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