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Unemployment Rate Falls - The Impact on Your Real Estate Investments

The department of labor released their November job loss figures this week boasting a decline in the number of new unemployment benefit claims continuing a five-week trend (see the press release). The immediate response from investors in real estate who were wishing for any sign of good news in this murky economy is a sigh of relief – we are on the mend! A decrease in claims means that more companies are adding new employees than they are letting go, and thus it appears the job market is improving. Commercial real estate owners nationwide likely view an improved job market as a sign that vacancy rates will decline, companies are more financially strong, and values will level out or even begin to increase. As shown in previous economic downturns, as joblessness decreases, the result is an increase in rental rates and occupancy rates. The optimist would take these numbers and run to adjust their 2010 projected income on their budget books. After all, the numbers don’t lie and history repeats itself. The realist will want to take a second look at the numbers and wait through the next few months before they are fully convinced of a market recovery. A close look shows that although new claims are declining, people who are collecting unemployment are staying unemployed for longer periods of time. There are also no strong indicators that companies are finished with all of their layoffs and downsizing – perhaps there is more to come. Boston.com noted in their review of the numbers that the employment offices were closed for much of the last week of November due to the holiday. So how many claims are just delayed until December? Finally, the conspiracy theorist might look at the numbers and think it’s all an effort to get consumers into retail stores for their holiday shopping, increase spending and tax revenue before the end of the year, and create an illusion of a stabilized economy. Well that might be going a bit far, but let’s not get over excited about this change of tide. All that optimism is what got us into this trouble from the start – so stay real out there! Complete our owners survey on how unemployment will impact your real estate investments. Get free weekly email updates of this blog.