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(Reprint of an Article by Morgan Housel, The Motley FoolA� for USAA, in the Spring 2011 USAA


The experts weigh in on jobs, housinga��and whata��s next. generika viagra bestpreis

Herea��s the good news:
Wea��re moving in the right direction.
The economic devastation of 2008 and 2009 was, more than likely, the
worst of this historic downturn.A� As we
move into 2011, the question now is what this nascent recovery will bring
us.A� Here are some things to expect.

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The old quip that a�?a recession is when your neighbor loses
his job; a depression is when you lose yoursa�? has rung true for tens of
millions of Americans.A� Therea��s no way to
put it gently:A� We have a jobs crisis.

Sadly, the pain of this jobs crisis will likely be with us through 2011.A� a�?A recovery from a financial-crisis recession
is inherently more difficult than a recovery from a regular recession.A� The effect on jobs is dismal.A� It will likely take until 2013 to recoup the
jobs lost to the recession as we struggle with subpar growth,a�? says Diane Swonk, economist, author, and advisor to the Federal Reserve Board and White
House Council of Economic Advisers.A� a�?The only silver lining is that it could have been worse, especially in light of the magnitude of the crisis, but that provides little solace for the record number of people who have already been unemployed for a record length of time.a�?

Why has it taken so long to restore jobs?A� There are three big reasons.A� First, employers dona��t have enough businessa��or theya��re too frighteneda��to create significant new
positions.A� Job growth is returning, but ita��s very slow.A� Meanwhile, population
growth still brings some 100,000 new job seekers into the work force every month.A� The economy has to create enough
new jobs to employ these new workers before making a dent in the ranks of the unemployed.A� As 2010 wound down, the
economy was barely creating enough jobs to keep up with population growth, causing the unemployment rate to stagnate.
Many economists expect more of the same in 2011.

Second, millions of homeowners owe more on their mortgage than their house is worth,
essentially prohibiting them from moving to where the jobs area��a problem
economists call strained labor mobility.A�A� a�?Americans will have to increase their mobility.A� Many of tomorrowa��s jobs wona��t be where
yesterdaya��s jobs were,a�? says Carlos Gutierrez, former CEO of Kellogg Co. and
secretary of commerce under former President George W. Bush.A� a�?Many people are living in the wrong
places.A� Housing policies, real estate company programs and retraining centers should take this into account.a�?

A third, more controversial reason is that todaya��s job searchers may not be qualified
for the jobs that are availablea��a theory called a�?skills mismatch.a�?A� Former President Bill Clinton elaborated on
this during a TV appearance last year, saying, a�?For the first time in my
lifetime, literally in my lifetime, when coming out of a recession, posted job
openings are going up at twice the rate of job hires.a�?A� The chief culprit for this, he said, is that
a�?the jobs that are open dona��t have the applicants that are qualified to do
them.a�?A� It takes time to retrain workers for a new economy.

Wea��re digging our way out of this jobs crisis, but ita��s going to be a long and
painful slog for many.A� a�?The American job
machine is in the repair bay,a�? says Clark Howard, a nationally syndicated radio
talk show host and USAA member.A� a�?I expect that a meaningful, legitimate recovery is in the range of four to nine
more years.a�?

If therea��s a ray of hope, ita��s the recent two-year extension of the Bush-era tax
cuts.A� In light of the extended cuts, most economists have raised their forecast of 2011 economic growth
considerably, to around 3.5 percent.A�A� Many think this could help create jobs faster than some imagine.

But not everyone is optimistic.A� While the tax-cut extension could fuel the year ahead, some worry ita��s a shortsighted fix
with negative long-term implications.A�A� a�?The economic value of extending the Bush-era tax cuts for high-income
earners is, at best, questionable, especially considering the amount the extension will add to the national debt,a�? says Ali Velshi, chief business
correspondent for CNN.

Real Estate Reality Check

This recession began in the housing market and wona��t end
until housing regains its footing.A� Most
of 2010 brought signs of housing optimism as the federal governmenta��s tax
credit for first-time homebuyers drew people into the market, helping to lift
prices.A� The idea was simple:A� Give people a cash incentive to purchase a
house, and theya��ll buy in droves.A� And it
worked marvelously while it lasted.

But it was temporary.A� With the housing credit now expired, predicting what home prices will do in 2011 is a very tricky matter,
even for the experts.A� a�?It is very hard to forecast now, since the homebuyer tax credit has no precedent,a�? says Robert
Shiller, a Yale economist and world-renowned housing expert.A� a�?We do see signs that confidence has been
coming back a bit, but as of now these signs are not persuasive evidence against further price declines.a�?

The strength of housing ultimately boils down to two basic factors:A� the number of buyersa��thata��s demanda��and the
number of available homes for salea��thata��s supply.A� As Shiller notes, forecasting demand is
exceptionally difficult heading into 2011 because the expiration of the housing
credit has no historical precedent.A� Standard prediction models get thrown out the window.A� Forecasting supply is no easy matter either.A� One might think measuring supply is simply a
matter of counting the number of a�?for salea�? signs.A� But it gets tricky when what economists call a�?shadow inventorya�? is factored in.
Shadow inventory consists of homes that should be for sale but havena��t yet hit the market.A� It includes foreclosed homes that banks
havena��t listed for sale, or homes owned by those who want to sell but are waiting for a better price.A� At the end
of 2010, there were roughly 4 million homes officially for sale nationwide.A� Estimates of shadow
inventory, however, could potentially increase that figure by an additional 5.6 million homes.A� Some economists and
analysts think that could drag home prices even lower through 2011.A�A� a�?There are a lot of people who probably want to sell and know that this isna��t an ideal time to put their house on the
market, with all of the unsold inventory and the foreclosures added every month,a�? says Velshi.
Shiller elaborates:A� a�?Shadow inventory is still a problem; it could take years to be cleared out.A� But
even that fact does not rule out a possible continuation of the rebound.A� These are just exceptionally uncertain

Velshi agrees, adding that prices may already be low enough to handle the additional
supply.A� a�?The market has priced this all in, and interest rates still remain a more important variable.A� If, like me, you think interest rates are
more likely to increase than decrease, then buying now trumps waiting for proven home-price stabilization.a�?

One reason the housing bubble got so out of control was that many people bought homes for
the wrong reason.A� For most of the last decade, houses were seen not as secure and affordable places to live, but as
assets bought solely for making money.A�A� With housinga��s outlook so uncertain, buying for the right reasona��because
you need a place to live and can afford what youa��re buyinga��has never been as
important as it is today.A� a�?People still largely believe that home prices cannot fall and will go up dramatically in the
long run,a�? Shiller says.A� a�?But, in fact, as real estate economists pointed out a half-century ago, technological progress
in the construction industry, and the willingness to keep increasing supply,
puts downward pressure on home prices, an important fact that has been almost forgotten.a�?

Daring to Be an Optimist
a�?This is the greatest country in the world,a�? Gutierrez says.A� a�?We are still the most innovative,
the most optimistic, the country with the most freedom.A� Ita��s ours to lose.a�?

As painful
as the past few years have been, one maxim remains true:A� This, too, will pass.A� History has a remarkable tendency to deliver
prosperity after misery.A� The Great Depression and World War II were followed by the economic success of the a�?50s
and a�?60s.A� The great inflation of the early a�?80s was followed by one of the most prosperous booms this country has
ever seen.

a�?There is always reason to be hopeful,a�? Swonk says.A�A� a�?We have survived worse and will survive this.A� Moreover, we are on the verge of the next
phase of the tech revolution, which will help even the least educated gain access to the work force eventually by innovating around skills shortages.a�?

Booms tend to follow busts.A� Busts tend to follow booms.A� If the historical trend of
downturns holds true, the coming decade will be much more prosperous than the
last.A� Digging our way out of this bust will be a challenge, but ita��s that same challenge that will plant the seeds of
a new era of prosperity.A� In his book The Rational Optimist, Matt Ridley closes by noting, a�?The 21st century will be a magnificent time to be
alive.A� Dare to be an optimist.a�?

Morgan Housel is a columnist for� He wrote this article exclusively for
USAA.A� His coverage of the financial crisis won a 2010 Best in Business award from the Society of American Business
Editors and Writers.

The views and opinions expressed in this article are solely those of the individuals and do not reflect the
opinions of USAA and its affiliates.

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  • Randy Nichols

    Thanks for posting the article, was certainly a great read!

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