How much worse can it get?
I just picked up the January employment numbers for the greater Chicago metropolitan area and the picture is getting more grim than I thought - we have hit a new 14 year low. The Chicago area has lost 162,000 jobs in just the
last 12 months and a total of 459,000 jobs
have been lost since employment peaked in July 2007. The unemployment
rate for the Chicago area is now at 11.7%, which is up from a low of
4.6% in November 2007 and that is higher than any rate that I have
access to (going back to 1990). And that unemployment rate is probably understated
because an official national unemployment rate of 10% corresponds to a
real unemployment rate of more like 17.5%.
These numbers had been showing nice growth until June 2008 when employment
started to drop from the previous year. Although a year ago it looked
like the employment numbers in the Chicago area had bottomed, the data
turned around and continues to fall off the cliff.
What does this have to do with the real estate market? Everything. People can't afford to buy homes if they're
not working and if they already have a home and lose their job then losing their home is next on the list. So employment levels are a great indicator of long term demand for housing. Therefore, we track the employment numbers reported by the
Bureau of Labor Statistics for the broad Chicago metropolitan area,
which includes such towns as Naperville and Joliet.