Unemployment Numbers and the Upcoming Effects

A few hours from now, the US unemployment numbers will be posted and I am betting that it will not be pretty. In addition, what most people don't know about the unemployment numbers is that the numbers do not include those that cannot claim unemployment, the self employed, 1099 employees, those that went back to school and those that have burned through the allowed maximum time to claim unemployment. Now, that's a lot more people than than those figures show. Although anyone who reads this blog is like, "man you are depressing me". I am a realist that follows and knows numbers and trends, geared with those bullets, here is this blog.

Thus, with these "skewed" unemployment numbers at hand, expect another wave of residential foreclosures and even more in the commercial real estate market. Although there are loan modification programs out there for those in the residential market, more loan mods are being turned away than being modified. In addition, although the credit crunch has improved greatly, it is still here as banks need to bolster their cash reserves and improve their balance sheets. Going back to unemployment numbers, as they increase, expect increases in foreclosures, since they have a direct correlation. Furthermore, the past foreclosures are a direct result of subprime borrowers, or those with less than perfect credit, no-doc loans, adjustable rate and interest only mortgages given out at a time when interest rates were at an all time low, where the timing of getting the loan would catastrophically lead to higher rates when the loans reset and as a result of lax credit lending standards that allowed lenders to grant loans at high debt to income levels. Now, the next wave of residential foreclosures will come from the prime borrowers, or those that have decent credit.

Unfortunately, with the increase in unemployment numbers, some of these will be from failed businesses and companies; hence, with failed businesses, that means less tenants in office buildings, strip malls and other commercial real estate buildings. This then translates into less revenue for the owners of all this commercial real estate, which will unfortunately turn many belly up. Like many people and many homeowners, many of the commercial real estate owners have borrowed and built too much for the supply and demand in the past "glory years" of real estate. This will put further strains on many banks, even the ones that are "too large to fail".

For the upcoming holiday season, the direction of retail sales numbers are going to be very interesting as well as the number of seasonal jobs created during normal holiday seasons compared to this year as a result of less consumer spending created from high unemployment. I hope that we start seeing the light at the end of the tunnel by this time and expect more blogs to come.