Monday, October 26, 2009

Weird day...

The market has been extremely skittish lately. On almost no news the market shot up 100 pts at the open and then sold off almost 200 points when some banks were downgraded. We'll see how things play out this week.

One of the issues that we haven't addressed as a nation is the length of time that it is taking the unemployed to find work. We've kicked the can down the road by continuously extending unemployment benefits.

Right now there is a bill in the Senate that will extend benefits again for 14 weeks (or up to 20 weeks in states with high unemployment). However, until this bill is passed - the two sides are fighting over the source of funding the extension via an extension of unemployment payroll taxes or from stimulus funds - roughly 7,000 people per day are seeing their benefits expire.

I'm not going to take a position on what should be done, that's for the politicians to decide. However, I'd note that dropping 200,000 people per month off the unemployment list will have a couple of implications: The unemployment rate may look better as these people fall off the rolls, the economic impact at the low-end of the income curve could be substantial and the strain on social safety nets will grow.

The San Jose Mercury News reported last week that nearly 20% of commercial office space in Silicon Valley was vacant. The Big Picture posted a comment from someone in the area on the bloodbath in commercial real estate in California right now.

"Ahh, the real issue in commercial RE: Too many sq ft.

Even in “leased up” buildings. The sub-lease market on the whole West Coast (and East Coast too most likely) is wide open. Deals are getting done at 35-40% of 2005-7 lease rates.

And, I see no private sector growth here in California that would even remotely start to fill existing space – let alone what is still coming on the market.

None of this analysis takes the public sector into account. State and local governments use alot of space in CA – they are all broke BEFORE taking the pension issue into account. If, over the next 5 years, the public sector disgorges sq. ft. onto the market, things could get even worse."


1 comment:

The Hermit said...

The senate should use stimulous money for those unemployed on the next extension. This will get the money to the folks who need it. Increasing sales of food, clothes, and gas will help the economy.
It sure beats bailing out more millionaires on wall street.