May 12, 2011 (Jeff Alan)
Freddie Mac has released its Economic and Housing Market Outlook report for May predicting a pick-up in economic growth in the second half of 2011 with unemployment lingering above 8 percent through the rest of the year. Freddie notes on the sunny side, that homebuyer affordability remains extraordinarily high due to a combination of low mortgage rates and housing prices well off their cyclic peak.
Job creation is a major concern according to Freddie Mac. With the unemployment rate almost twice what it was before the recession, Freddie Mac says that approximately 260,000 jobs need to be created monthly, on a sustained basis, to reabsorb all the jobs lost during the recession.
Unfortunately, the report notes, the recovery is not growing fast enough. Freddie projects that 130,000 jobs must be created every month just to keep up with labor force growth and another 130,000 jobs need to be created each month over the next three years just to get employment back to pre-recession levels.
According to the U.S. Labor Department, 244,000 jobs were created last month, the best performance in almost five years. However, many analysts report that government statistics don’t take into account the amount of unemployed who give up looking for a job every month and drop off the government statistics. They believe that the job market actually contracted by as much as 100,000 to 180,000 jobs.
Regardless of which side of the fence you sit on, unemployment last month rose to 9 percent with the average duration of unemployment at 38.3 weeks, a slight improvement from the record 39 weeks in March. As a result, Freddie Mac says large numbers of workers who remain unemployed for long periods of time remain the predominant force behind seriously delinquent rates on mortgages.
Freddie Mac does however project that with an improving economy, they expect the rate of seriously delinquent mortgages, 8.6 percent at years end, to trend downward in 2011. Freddie is also projecting a 5 percent increase in home sales in 2011 over 2010.
Frank Nothaft, vice president and chief economist of Freddie Mac, said, “We also expect a pick-up in economic growth in the second half of 2011, which should help to propel additional job gains later this year. Still, while the labor market is moving in the right direction, it still has a long way to go before the unemployment rate moves sharply lower. And ditto for serious delinquency rates on mortgages.”
Tags: Freddie Mac, Market Outlook, unemployment, homebuyer affordability, job growth, job creation, pre-recession levels, jobs, seriously delinquent mortgages