Interesting analysis. .I have always felt the financial sector is the most useless part of our economy.
The financial sector, aside from the salaries it pays, doesn’t create growth. Its economic function is to channel capital from those who have an excess, to those who need it to grow a business. In theory it does this by efficiently weighing the risks and returns of available investments. It can go off the rails, however - as it did with sub-prime mortgages - when the temptation of higher returns (and bigger salaries) outweighs the fear of risks.
The unfortunate fact that hiring in the financial sector always speeds up before an economic slowdown seems to mark this unhealthy tilt - salespeople are hired, not risk analysts.
Jobs in finance are now growing at a 2.1 percent rate, the highest since the 2.7 percent reached in 2006. That doesn't mean a recession is just around the corner, but it's a signal of slower growth during the next few years.
Jobs in September were up 1.7 percent from last year, the same slightly slower pace of the last few months. Jobs were down a half percent in manufacturing, up 1.8 percent in retail, up 3 percent in business services, up 2.8 percent in healthcare, and up 2.4 percent at restaurants.
Among other indicators of future growth, jobs in trucking were flat (bad) and temp jobs were up 2 percent (good). Unemployment remains around 5 percent.
I think the trend is moving away from finance and towards tech. I saw a chart couple days back on where MIT graduates go to work. It used to Wall St got the lion’s share, now it’s Silicon Valley.
While I agree with @manch that more grads are heading west to SV than Wall Street these days, I wouldn’t necessarily paint the whole financial sector as being useless. We are talking about much more than just VCs now. You have the banks that help folks hold their money, maybe have mortgages with, take care of other financial obligations, etc. That money being taken in theoretically is driving economic growth when lending is done for business or again personal lending. Let’s not forget the insurance industry and all that it does (health insurance, personal and auto, etc). Hardly useless. Tech is not going to do everything for you. We had this discussion yesterday about the real estate apps. Are you @Elt1 going to buy a property via your phone? Exactly. No. A resounding no.
I suspect you don’t put all your dough in your mattress, cuz that would be one freaking thick (but comfy) mattress…
I am seeing plenty of signs of a slowdown. …Rental glut is driving down highend rental prices…Highend glut of houses and condos…The exburbs even are showing signs of softing…Have sold 5 of my Stockton houses…The Sixth one is seeing a price deduction. .Time of year, election uncertainty. …Wait till spring to confirm it…But a friend who manages 450 luxury apartments in SF and his wife who is a South bay realtor say the slowdown is upon us…
The tea leaves are showing signs of a slowdown in the BA…Nationally though the economy is still growing and there is a national housing shortgage…even so builders are still building half of what they did in boom times…
Growing ~1%… I think everyone is hitting pause and holding their breath until after the election. Either way people will know what’s next and can move accordingly.
The slowdown is just in real estate. After some crazy gains in the last 4 or 5 years I think it’s healthy to pause a bit. Economy is still on fire I think.
Hillary’s 2 big policy platforms are infrastructure spending and immigration reforms. Both are very bullish for the economy.
Do you remember the economic boom from the “shovel ready” jobs in the stimulus bill? It takes about $400k of debt to create one short-term job. $80k of GDP growth creates one sustainable job.
The stimulus bill was too small. Still, we avoided Great Depression II, so that’s a pretty good accomplishment already.
If Hillary can successfully push thru immigration reform, that would be huge for Bay Area real estate. Not just the high tech part. That’s obvious. If there is a path for the undocumented to get legal status, we will capture a huge part of the underground economy and suddenly these people can get credit and mortgages. Huge boom will follow.
The size doesn’t change that it’s $400k/job. The stimulus bill didn’t help us avoid a Great Depression. The spending didn’t even get going until the recovery was under way. The fed slashing interest rates and buying equity in banks to give them capital did more than anything congress did.
Don’t see a slowdown in real estate atleast in Sunnyvale, Santa Clara , Cupertino and Mountain View . Single family houses still selling like hotcakes. Most houses are sold with just one open house. Maybe the condo market is slowing down . I do see rents coming down in this hot areas too . But with the limited supply of SFH wondering if it would hit them anytime soon.
Condos and luxury homes are the canary in the mine…First to drop in a down turn…But this temporary lull may be due to the election…Wait till February, if inventory builds and buyers drop out of sight then maybe prices will drop…
"The main difference with today’s market is that these home prices are not being driven by shady mortgage products, but instead a severe lack of supply and near record low rates. Homeowners also have more equity in their homes than in 2008, which means they are less likely to default on their loans. These dynamics unique to the current market conditions continue to put upward pressure on home prices.
After years of surging house prices and record low mortgage rates, the seed has been planted for another housing crisis. It might not be identical to the one in 2008, but the aftermath could be equally as devastating."
Shortage of supply and lots of equity…Where is the downside? What will make the supposed bubble burst? The housing shortage is real…And the nimbys wont let us build enough supply to create a glut
Well, I think it is important to be aware that something too good sometimes, may be just that, too good. We have had an incredible run-up in housing pricing. Is that really sustainable? One thing he mentions is the record low mortgage rates. Well, what would happen if that did go away? We may have less sub-prime lending issues now than before but higher mortgage rates would impact the housing market negatively, no? Couldn’t reduced home buying cause ripple effects in the marketplace? Fewer construction jobs/starts, more unemployment, etc…
The only thing which can bring a downturn is if the new IPOs go bust, not just one or two but a good percentage of them . No sign of it yet but thats a possibility given the high valuations.
Also we still have flood of chinese money coming to bay area real estate , wondering how that can slow down .
Just talked to broker in Sacramento. …the market for multi family is super hot…BA money is spreading out. BTW her biggest investor is from Canada…there is still lots of money out there…
