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Friday, May 27, 2005

Housing Bubble Related Jobs

Barry Ritholtz at The Big Picture points out that "employment in housing and related industries accounted for about 43.0% of the increase in private sector payrolls since the economic recovery began in November 2001".

From A Durable Economy? If we look around we certainly see an incredible number of new homes, new condominiums, new strip malls, and new office buildings. This would account for construction, realtor, title, escrow, appraisal, loan origination, processing and servicing (lending) jobs the bubble has created.

Furthermore, from a previous post regarding debt acceleration and decreasing GDP yield:

1970's $1 increase in GDP = $1.75 increase in debt.
1990’s + $1 GDP = $3.64 increase in debt.
2000's + $1 GDP = $7.11 (through end of 2003)

When you compare debt to the self sustaining productive portion of GDP (manufacturing, construction, agriculture, mining, transportation etc.): The ratio is + $1 GDP = $63 debt.

The increase in debt to GDP ratio indicates that today, more debt is required to increase GDP as compared to years past. This erosion is a clear indication of an economy built on asset based lending, speculation and debt creation (MONEY SHUFFLING).

This explains why new hiring is concentrated in real estate, government and construction hiring. But we have to ask has this economic expansion actually created any new technologies or even new businesses? It seems, we have arrested the economic process of capitalism.

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