Back on May 29 when University of San Francisco business professor Jon Fisher and I forecast 9 percent unemployment in 2009 based on a correlation between housing starts and job losses, a number of readers, colleagues and even my relatives scoffed at the idea. "Those are European unemployment numbers," my cousin said. "Don't you think that's a little extreme?" asked a colleague.Believe me, I don't like making the forecast, but the country is inching closer to 9 percent unemployment and I cringe each month when the unemployment report comes out. When the October unemployment report was announced and came in at 6.5 percent with 240,000 jobs lost in September (and over 500,000 lost in the past three months, 1.2 million this year), the number was shocking (more commentary below the video player):
Now others, including Microsoft's founder Bill Gates and former Citi Chairman and CEO Sandy Weill, are also now forecasting 9 percent unemployment, according to published reports (Weill's article and Gates' article).
And the September numbers on housing starts - the lowest in 17 years - continue to support the 9 percent unemployment forecast. The loss of 49,000 construction jobs in September is somewhat tied to the drop in housing starts. In fact, one analyst suggests that if you adjust the numbers for population growth, the number of housing starts is the worst (lowest) ever recorded (more commentary below the video player):
Still, however, Fisher doesn't think the Dow Jones Industrial Average will test its yearly low (Oct. 10th's 7,773). Though as I write this the DJIA is below 8,500. Fisher, who was bearish earlier in the year, now considers himself a bull.
"This is not total doom and gloom," Fisher writes, who is also the author of Strategic Entrepreneurism. "Yes, the unemployment number is terrible but I believe we're at V shaped bottom in new housing starts." And that, as a result, a real estate price recovery could begin next year. Equities stability will be here soon, Fisher contends, and most of the unemployment is due to past damage and not damage to come. "The bottom line is we have been in the worst for a while - I am well documented bear - and now I see us recovering!"The U.S. will likely see nine percent unemployment in 2009. Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio