Federal Reserve Chairman Ben Bernanke spoke before the Joint Economic Committee of Congress last week about what he sees as our true economic outlook. In this statement he avoided sugar-coating worrisome trends and instead made clear that "the recovery is close to faltering."

According to Bernanke, it has been three years since the beginning of the financial crisis, and while there have been improvements, such as manufacturing production rising 15 percent, a reduced U.S. trade deficit, and improved functionality in financial markets and banking, it is clear that the recovery is "less robust" than experts had hoped.

Bernanke noted, "The housing sector has been a significant driver of recovery from most recessions in the United States since World War II. This time, however, a number of factors--including the overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and the large number of "underwater" mortgages (on which homeowners owe more than their homes are worth)--have left the rate of new home construction at only about one-third of its average level in recent decades."

In a slice of good news, however, private residential construction spending has risen 3.9 percent year over year, making for the fourth month of consecutive gains (0.7 percent gain in August) and the largest percentage gain since June of 2010.

The National Association of Home Builder's Eye on Housing reports, however, that "demand for new homes remains hampered by significant competition from distressed sales, tight lending standards and a weak labor market."

Pending home sales, according to the National Association of REALTORS®, slipped in August, down in all regions. Lawrence Yun, NAR chief economist, said the decline reflects an uneven market. "The biggest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene in the closing weekend of August," he said. "But broadly speaking, contract signing activity has been holding in a narrow range for many months."

Yun said the market is underperforming given a pent-up demand in household formation. "We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures," he said. "Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, we should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy."

The good news for jobs? We are entering the holiday season and many of the nation's top retailers are reporting they are gearing up for seasonal hiring. The New York Times reports, "Even with a turbulent economy, leading retailers say they expect to hire more, or at least as many, holiday workers as last year, when temporary hiring for Christmas grew nearly 50 percent over recession lows."

Kohl's is set to add 40,000 new hires. J.C.Penney plans on adding 35,000 and Target plans on hiring 92,000 holiday workers.

This is welcome news as Bernanke reported that the most significant factor depressing consumer confidence, even more so that reduced household wealth, home price declines, and high debt burdens, has been the poor performance of the job market.

The latest report from Automatic Data Processing (ADP&Reg;) showed that private-sector employment increased by 91,000 from August to September on a seasonally adjusted basis. "Like August, this month’s jobs report continues to show modest job creation," said Gary C. Butler, Chief Executive Officer of ADP. "The number of jobs added to the private sector in August and September were virtually identical." This all means that while jobs reports aren't spectacular, they could be worse.

Published: October 10, 2011

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Carla Hill, M.A., works on the Realty Times staff as Managing Editor for our online publication. She also is Producer for the real estate news channel, seen daily on RealtyTimes.com and on video newsletters nationwide.