Be careful what you wish for -- you just might get it. The national press wanted to knock housing down as king of the hill, and they succeeded, but now the stock market is tumbling down the hill as well. And the recession that's been feared for months will finally come.

Last week's jobs report is the harbinger of a tough winter to weather. Unemployment is now over 5% from 4.5% only a quarter ago. December job growth was the weakest since 2003, according to the Labor Department. That's far worse than forecast by analysts.

How can we have job gains and rising unemployment at the same time? Shouldn't those numbers be in lockstep?

Well, that's where statistics can fall short. Unemployment numbers are worthless without the context of demographics. Our population is growing, but less than half of industry is hiring (48%.)

We're adding one person (net gain) to the U.S. population every 13 seconds. About two/thirds are working age, so we're adding around 2,217 people a day. Times 30 days? That's 66,520 people who need jobs and we only added 18,000 in December.

That means competition for jobs just got harder. If you get to keep your job, you're not likely to get a raise, unless you're the CEO of a public company, and those aren't likely to do that well in 2008 either.

Obviously, our mixed-up values need some serious straightening out. We haven't had a housing bubble, we've had a credit bubble.

We're a capitalistic society, so we've put out as many products and services as we can think of and made them as easy to buy as possible. We've encouraged people to spend, including buying homes when they couldn't afford them. We've encouraged them to refinance and use the money for vacations and college. And now the public is maxing out its credit cards and we're at negative savings, owing more than our disposable income should allow.

We're at the point where we can't make people buy anymore.

But that could be a good thing. Job loss will shake consumers up, and they'll have to be wooed back to the malls and to housing. And the only way to do that is lower prices and cheaper credit.

The Federal Reserve will cut target borrowing rates again, and consumer credit will become even cheaper than it already is.

But smart consumers, especially homebuyers, will do the smart thing when that time comes -- use the lower rates to clean up their credit.

If you know anyone who wants to buy a home, tell them low interest rates are a gift and it won't last.

Published: January 7, 2008

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