Green shoots abound...

Wookster

... NOT

Jobless will pass three million, says Blanchflower
By Sean O'Grady, Economics Editor
Tuesday, 2 June 2009SHARE PRINTEMAILTEXT SIZE NORMALLARGEEXTRA LARGE
Against a background of reports of recovering upbeat business sentiment, one of the Bank of England's senior policymakers warned yesterday that unemployment would continue to climb this year and next, by as much as 100,000 a month, to beyond 3 million.

David Blanchflower, a US-based academic who retires from his position as an external member of the Bank of England's Monetary Policy Committee this week, told Radio 4's Today programme: "The worry is that we have lots of downside risks. I suspect we are going to see unemployment increasing through the rest of 2009, probably through much of 2010 as well, and these increases are going to be large."

Mr Blanchflower was one of the few economists to correctly call the depths of the recession gripping the economy, and has spoken out about the caution of his fellow MPC members.

However, the Chartered Institute of Purchasing and Supply (Cips), in the latest survey of views of its members in the manufacturing sector, detected some improvements ahead. Although the Cips poll indicates that business people continue to expect output to fall, the prospects for employment, while again still declining, are better than at any time over the past six months. The destocking seen in recent months which has hit output especially badly appears to be slowing down.

Access to finance also appears to be improving. The Confederation of British Industry says the rate of deterioration in credit conditions has slowed further over the past three months, and conditions are expected to stabilise in the months ahead. Ian McCafferty, the CBI's chief economic adviser, said: "Big companies who were encountering serious problems getting credit at the start of the year are still finding it difficult, but they expect that the supply of existing credit will get slightly easier over the next few months."

In the housing market, the latest Land Registry figures confirm a picture of gradual stabilisation, showing that property prices were down by 0.3 per cent on the month in April, and 16.2 per cent on the year, the same as March.

http://www.independent.co.uk/news/business/news/jobless-will-pass-three-million-says-blanchflower-1694648.html

I'd like to know how people think house prices have started to rise consistently if unemployment continues to rise at such a fast rate.

System

Wookster wrote: »

I'd like to know how people think house prices have started to rise consistently if unemployment continues to rise at such a fast rate.

I don't think it's a case of people thinking they've risen recently, they statiscally and factually have done. That's not to say they will keep rising of course or that they won't fall again.

mitchaa

What link is there between rising unemployment and falling house prices?

Not a pi** take, a serious question.

IveSeenTheLight

Joeskeppi wrote: »

I don't think it's a case of people thinking they've risen recently, they statiscally and factually have done. That's not to say they will keep rising of course or that they won't fall again.

Exactly.

If you take the section Wookster has highligted, sure there is a neagative risk with unemployment rising, but there are also positive things to read in the report i.e. increase in confidence of manufacturing, an easing of credit and Land Registry confirming gradual stabilisation of house prices.

Seems like Wookster only saw the negative point but missed / ignored / dismissed the three positive parts of his quote.

No wonder he thinks there are no green shoots abound

StevieJ

IveSeenTheLight wrote: »

No wonder he thinks there are no green shoots abound

Maybe he is colour blind and can't register green

Dan:_4

Unemployment was also very high during the 1980s, even at the peak of the boom in 1989.

Masomnia

I swear the bears on here go on about green shoots more than the bulls...

ray123

Everytime I come on this board all I hear about is Gordon Brown and his magic beanstalk...
Some people are living in a fairytale if they think that we will all live happily ever after!

Spiv_2

Wookster wrote: »

I'd like to know how people think house prices have started to rise consistently if unemployment continues to rise at such a fast rate.

I agree with your points about unemployment but you may have underestimated the problems of supply in the UK market.




I draw your attention to the above. Plus the fact that it estimated that there has only been between 80,000 and 133,000 units built this year, much less than the 80's and 90's crash.

Also as stated in the "Nationwide Report" the following:-

“The movement of house prices ultimately depends on the balance of demand and supply of houses on the market. One timely indicator of the supply-demand balance is the ratio of sales to unsold stock, published monthly by the Royal Institution of Chartered Surveyors. For most of 2008, this measure was on a steady declining trend, consistent with the acceleration of house price falls as the year progressed.
Although it remains at a very low level by historical standards and continues to point to further house price declines, the ratio has recently stabilised somewhat and this probably explains some of the improvement in price trends over the last few months."

“It is not yet certain, however, whether the sales-to-stock ratio will rise on a more sustained basis over the coming months. House sales still remain close to record lows, so that the improvement in the supply-demand balance is so far mostly attributable to a decline in the stock of property on estate agents’ books. There are several possible reasons why stock levels are falling. First, the rate at which additional property is coming onto the market could be lower than the rate of sales. This may be the case if many potential sellers are holding back from putting their homes on the market for fear of not being able to obtain their desired price in the current economic conditions, or if few new homes are being built. The latter is certainly the case, as builders have retrenched and housing starts have reached all-time record lows. Second, unsold stock levels could fall if existing sellers give up and withdraw their properties from the sales market, either by letting them out or choosing not to move for the time being. Recent anecdotal evidence suggests that there has been a large rise in sellers choosing to let their properties instead of holding out for a buyer, which could explain at least part of the fall in stock levels."

“If the supply of homes onto the market does increase, the recent moderation in the pace of house price falls may not be sustained. However, the ultimate outcome for prices depends as much on the development of demand as it does on supply dynamics. Survey evidence suggests that buyer interest has picked up strongly in response to lower prices and lower interest rates. If this buyer interest
translates into actual sales and outweighs any potential increases in supply, then the recent moderation in price falls may continue. For the moment, however, it is unclear how the balance between supply and demand will ultimately work through in the coming months.”




I'm not calling the bottom tbh, I'm just highlighting the supply side.

Yakubu22

Spiv wrote: »

I agree with your points about unemployment but you may have underestimated the problems of supply in the UK market.




I draw your attention to the above. Plus the fact that it estimated that there has only been between 80,000 and 133,000 units built this year, much less than the 80's and 90's crash.

Also as stated in the "Nationwide Report" the following:-

“The movement of house prices ultimately depends on the balance of demand and supply of houses on the market. One timely indicator of the supply-demand balance is the ratio of sales to unsold stock, published monthly by the Royal Institution of Chartered Surveyors. For most of 2008, this measure was on a steady declining trend, consistent with the acceleration of house price falls as the year progressed.
Although it remains at a very low level by historical standards and continues to point to further house price declines, the ratio has recently stabilised somewhat and this probably explains some of the improvement in price trends over the last few months."

“It is not yet certain, however, whether the sales-to-stock ratio will rise on a more sustained basis over the coming months. House sales still remain close to record lows, so that the improvement in the supply-demand balance is so far mostly attributable to a decline in the stock of property on estate agents’ books. There are several possible reasons why stock levels are falling. First, the rate at which additional property is coming onto the market could be lower than the rate of sales. This may be the case if many potential sellers are holding back from putting their homes on the market for fear of not being able to obtain their desired price in the current economic conditions, or if few new homes are being built. The latter is certainly the case, as builders have retrenched and housing starts have reached all-time record lows. Second, unsold stock levels could fall if existing sellers give up and withdraw their properties from the sales market, either by letting them out or choosing not to move for the time being. Recent anecdotal evidence suggests that there has been a large rise in sellers choosing to let their properties instead of holding out for a buyer, which could explain at least part of the fall in stock levels."

“If the supply of homes onto the market does increase, the recent moderation in the pace of house price falls may not be sustained. However, the ultimate outcome for prices depends as much on the development of demand as it does on supply dynamics. Survey evidence suggests that buyer interest has picked up strongly in response to lower prices and lower interest rates. If this buyer interest
translates into actual sales and outweighs any potential increases in supply, then the recent moderation in price falls may continue. For the moment, however, it is unclear how the balance between supply and demand will ultimately work through in the coming months.”




I'm not calling the bottom tbh, I'm just highlighting the supply side.

What about the estimated 800,000 empty properties in the UK? You only need to look at apartment blocks around Manchester to see this. Towers of almost entirely empty flats. There is no shortage of property.

Conrad

Whilst I wouldn't point to a rise in prices this year, it's fairly likely the bottom has been reached now, for good.

Unemployment was 3m in 1997, yet I can look back at my mortgage business stats back then and see I was booming. 3m is not enough to derail the housing market.

Add to this the ultra low rates and fact exisiting borrowers are porting variable rates of 0.1-3%.