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Unemployment Woes Affect Foreclosure Rate, Damaging To Fragile Housing Recovery

According to a July 31, 2009, article in the Dayton Business Journal that cited recently released data from the U.S. Bureau of Labor Statistics, “forty-one of the nation’s 100 major labor markets, including Dayton at 12.1 percent, are now saddled with double-digit unemployment rates.” On July 15, 2009, the Associated Press reported that the Federal Reserve expects that the national unemployment rate will reach 10 percent and continue to remain higher than usual for a few years. Officials and experts are concerned about the affect of higher unemployment rates on foreclosure and the fragile housing recovery.
The nation’s unemployment rate has reached a level not seen in decades, shedding hundreds of thousands of jobs with each passing month. According to a recent FOX News report, “employers throttled back on layoffs in July, cutting just 247,000 jobs, the fewest in a year.” As the economy shed jobs, the government moved to try to ease the burdens of those affected by enacting significant extensions of unemployment benefits. As a result of those extensions, reported the New York Times on August 1, 2009, “people can draw benefits for up to 79 weeks in 24 states and from 46 weeks to 72 weeks in others.”
However, according to the New York Times article, because of the intractability of the current bout of unemployment that is taking place within one of the most difficult economic periods the nation has endured since the Great Depression, many workers are reaching the end of their unemployment benefits without finding sufficient employment. Citing recent information from the National Unemployment Law Project, the New York Times reported that “tens of thousands of workers have already used up their benefits, and the numbers are expected to soar in the months to come, reaching half a million by the end of September and 1.5 million by the end of the year.”
Many experts and officials throughout the nation are very worried about how that will affect potentials for economic recovery, particularly in the realm of the housing market. In some regions, home prices have started to stabilize somewhat, though in the areas hardest hit by the foreclosure crisis, prices are still falling. However, with the number of workers running out of benefits without finding the employment they need, there is the danger of a rise in home loan defaults, as workers struggling to make ends meet can no longer afford to make their monthly mortgage payments. A rise in foreclosures can further depress home prices.
In addition, as reported by the Associated Press on July 15, 2009, the Federal Reserve doesn’t see the unemployment situation improving anytime soon. In fact, the Federal Reserve predicts that the national unemployment rate will continue to rise, passing 10 percent by the end of the year and stay at higher than usual levels for three to five years. These circumstances have led the federal government to consider moving for the fourth time during this economic downturn to extend unemployment benefits, according to an August 7, 2009, article in the Los Angeles Times.
With the turmoil and uncertainty that is still so much a part of the economy, preparing to withstand a period of unemployment or some other fiscal crisis is an essential personal finance strategy, especially for those making monthly mortgage payments or with other basic, important loan repayment obligations. Reducing non-essential spending and increasing personal savings can make the difference between being able to withstand a personal economic downturn with home, auto, and other possessions and property intact or not.