What do home sales in London and US non-farm payroll growth have in common? Simple: They’re both falling. But that’s where the commonality ends…and where this blog begins.
Why you should care: The headlines bemoan the same concern: Non-farm payroll growth slipped in April to only 160,000 new jobs. This, they all say, is a bad sign. For the US economy. And it’s further proof, they’re saying, that the FED will move even slower toward higher rates. On this we agree. FED actions are ‘data dependent’ and this data will cause the FED to stay put longer.
Taking action: First, don’t worry. All is good. This number is simply one more indicator … one more demonstration that our economy is ‘just OK’. Economic conditions are not bad, nor are they setting the house on fire. They’re just OK.
But we can’t say the same about home sales – and home prices – in London. So here’s action item number 2: Head to London this summer and buy a house! You’ll get a great deal! (Well, except for the taxes.)
THE BLOG: We’re not going to spend much time on the April non-farm payroll numbers. Sure, they grew by only 160,000. A low reading, to be sure, when compared to 208,000 in March and 233,000 in February. But don’t worry. Our economy is on ‘simmer’ and this is proof once again.
The unemployment rate – the BLS data point known as ‘U-3’ – remained at 5.0%. The larger unemployment measure that I focus on, U-6, remains at historical highs, 9.7%. (Click on the chart to enlarge.) By this metric, the true unemployment rate remains quite high. (In the first 1/2 of 2007, before the crisis began, this number ranged from 8.2% to 8.4%)
But not much has changed. Sure, job formation slowed a bit. But I’m not surprised. This, again, is another sign of a lukewarm economy. If you want to dig a bit deeper here, check out my blog post from April 1st:
OK…let’s move to something really surprising! A bit more than a month ago, I posted this BLOG:
On May 6th, the WSJ reported this headline: “Prime Central London Home Sales at Lowest Level Since 2009.” Apparently April sales in Chelsea and Kensington fell dramatically – to their lowest number since the financial crisis. And prices fell 7% (in 1 month!) in the Kinghtsbridge neighborhood. Shocking!
Why am I shocked? I’m kidding of course. This outcome was completely predictable. With a newly imposed transfer tax up to 15% of the sale price, this result was inevitable. And the bloodbath won’t end here. Prices will continue to slide – probably at an increasing pace. The combined weight of the new transfer tax and the uncertainty caused by the ‘Brexit’ discussions are like an anchor around London’s housing prices after being thrown into the Thames.
…The only shocking thought might be that the dummies in government didn’t predict this outcome. Which is no shock to me.
- Terry Liebman
Terry Liebman 