Originally posted by @Tim Kunz:
@J. Martin unemployment rate already growing in Texas is interesting.
A couple more interesting graphs/notes/questions/observations:
- Housing prices seem to be getting more volatile
- Will housing prices be affected in the next recession? 2001 - not affected at all / 2008 - highly affected
- Will we fall back to the pre-bubble trend lines as seen in the lower graph?
On another note, what keeps us from every staying at low unemployment? It's very interesting that every time it gets that low we can't keep it there
*TX*
HOUSTON
Tim, at first, it was just the Houston / Sugarlands area and the oil drop that was causing increases in the unemployment rate, and Austin was still booming. Houston has looked like it is in a recession, compared to the prior 3 recessions, since the last half of 2016. The unemployment rate hit a low of 4.1% in April 2015. By Feb 2017, the Houston area unemployment rate had increased to 5.9%, a 1.8 percentage point increase that has signaled the last 3 recessions.
* the grey shading and blue line in future are my speculation, based on looking at the prior cycles. Look where the unemployment rate spikes, and recessions have occurred in the past.
AUSTIN
Through the end of 2016, Austin was holding its own, even though Houston unemployment was going down the toilet. However, the Austin unemployment rate has been bouncing around 3% and higher since it first hit 3.0% in April 2015, when Houston as also at its best. In the last 2 years, you see the Austin unemployment rate has gone flat and slightly increased - not offsetting Houston's losses like it used to in 2016.
SAN ANTONIO
San Antonio area is a similar story to Austin. While doing better than the Houston area, the party appears mostly over. The unemployment rate in April today is higher than April of 2015.
The caveat here with the national recession being called was in the 1990's recession. It looks like TX was already well into a recession, with high unemployment rates, before a recession for the whole country was called. Oil prices dropped in half in the year 1986 alone, along with a 6-year price drop due to the 80's oil crisis. So we could see TX in its own localized recession for a while before a nationwide recession is identified by the NBER and added as grey shading in the graph...
*Prices not dropping during Dot Com bust*
It's hard to find in the data, but have heard anecdotally from quite a few people that have lived in the Valley for a while that SFH prices in core Silicon Valley definitely dropped temporarily during the dot come bust - Cupertino and Mountain View specifically mentioned. Maybe @Sandeep S., @Kathryn M. , or @Arlen Chou can add more to that.
*NOMINAL VS REAL PRICE*
Tim, I like the comparison with inflation. However, I would note that your trend lines on your graphs are linear, as is your Y axis for prices, which makes less and less sense over a longer time horizon. The growth of nominal prices should grow by % increases over time, which will lead to an upward-curved, exponential type of growth in nominal prices. So I wouldn't extend/extrapolate those trend lines to come up with whether or not the market is reasonable. Just my 2 cents..
WHY CAN'T WE DANCE FOREVER?
"On another note, what keeps us from every staying at low unemployment? It's very interesting that every time it gets that low we can't keep it there"
There are many reasons booms have not gone on forever, in the history of the recorded world (and that they end fairly regularly). Depending on the cycle... Usually..
- employers can no longer find qualified employees as productive as existing employees, at the same cost (have you tried to hire people lately?)
- wages start to increase, squeezing employers, and increasing prices
- after a long cycle of easing credit and fierce competition among financial institutions for lending business, and consumers & investors stretching themselves more, credit terms start to tighten again
- the Federal Reserve increases interest rates, increasing the cost of borrowing
- usually, oil/energy prices increase with increased US & global consumption, increasing costs across industries
- consumers got used to the wind at their back and got used to it. They eventually tighten up, faced with a higher credit and interest rate burden, rising prices, less access to capital from tightening credit..
- businesses foresee a slowdown in consumer spending, and reduce hiring and capital investment
- .. which causes consumers to hunker down more, and then businesses to hunker down more.. and so on and so forth..
Janet Yellen famously said a bit back
"Expansions don't die of old age."
I guess you could also that old people don't die of old age.
They die due to one of the many maladies that have largely been created by their long life span. ;)
@Minh
@Account Closed , anything to add?
