Local Market Monitor’s National Economic Outlook for September ’22
National Economic Outlook
By Ingo Winzer
Home prices in the second quarter were on average 20 percent higher than last year, 30 percent higher than they were two years ago. There is no economic underpinning for this phenomenon. The number of jobs in the economy is now exactly the same as before the pandemic, two and a half years ago; we can congratulate ourselves on that recovery but it’s not a sign of robust growth. And the income from those jobs is probably the same as then, or even lower, in the face of 9 percent inflation.
The vast majority of people can’t afford to buy a home or pay higher rents. This means that the recent home price increases can’t last, even in local markets like Austin, Tampa or Phoenix, where economic growth has been very strong. We’re facing a deflation of the bubble and it may happen soon.
The FHFA monthly home price index was flat in June, for the first time in two years. Home prices were down, even if just a bit, in New England and the West, and were up only slightly in Florida. There’s a good chance we’ve already seen the peak of the market, with a long slide in prices before us. It’s just one month of data, but an ominous one. We’ll know more in November, when new data come out.
The strongest sector in the economy has been business services, where jobs are now 5 percent higher than before the pandemic. But other sectors are not doing very well, and services to businesses can only continue to do well if other businesses are doing well.
Compared to late 2021, jobs in August were up 3 percent, including gains of 3 percent in construction and manufacturing, 2 percent in retail, finance and healthcare, almost 4 percent in business services, and 6 percent at restaurants. Jobs in government were up a meager 1 percent.
It may be that the growth we’re measuring this way isn’t real growth, just recovery. The pandemic is still among us and, more persistently, in the rest of the world. It probably will continue to hamper the international trade on which our own prosperity rests.
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