Credit and Job Markets: A Shaky Start to 2008

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Minutes of the December 11 FOMC meeting showed that Fed officials were surprised by the more rapid softening in consumer spending and the steepening in the housing correction. These developments, along with “renewed strains in financial markets,” led officials to expect “somewhat more sluggish” growth than they had in their October projections. Officials did not expect to solve all the problems creating stress in the credit markets, but saw their actions as helping to relieve pressure, particularly at year-end.

We are clearly not out of the woods, but credit market conditions have improved into early 2008.

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A majority of December’s increase in unemployment was in those on permanent layoffs. Structural layoffs picked up into the last two recessions. However, it’s unclear how significant the current structural changes (the consequence of a bursting housing bubble) will be. Residential construction accounts for only a small fraction of overall employment, but there were also housing-related jobs in finance.

Can the overall economy weather continued job losses in manufacturing and construction? Most likely, yes – however, these types of job losses will have a significant impact on the local economies.