It’s a vicious cycle that ultimately affects all industries, businesses, and consumers. If consumers don’t have jobs, they cannot buy or rent homes—or make timely mortgage payments. Without jobs, people won’t step into stores or make purchases.
Without sales, shops and department stores earn no income and can’t provide jobs. In addition, it means that stores can’t buy products from the manufacturers. In turn, manufacturers are going bankrupt, downsizing, or closing doors.
This cycle directly affects the real estate market—a key driver of the U.S. economy—leaving in its wake rental, commercial, or residential properties vacant throughout the United States.
Corporate Downsizing
Laying off staff creates more problems and perpetuates economic disaster. “In a nutshell, making employees redundant is a double edged sword, yes it reduces corporate costs and increases profitability, but it also kills the golden goose that was laying the golden eggs,” according to a recent unemployment article titled “Structural Unemployment—Human Sink Holes.”
The private sector hasn’t shown marked improvement in creating jobs, as the unemployment rate gives no indication of declining and companies are still laying off people.
“Employers took 1,609 mass layoff actions in July that resulted in the separation of 143,703 workers. … The manufacturing sector accounted for 25 percent of all mass layoff events and 31 percent of initial claims filed in July,” according to data from the Bureau of Labor Statistics (BLS).
In July, the unemployment rate still hovered around 9.5 percent, according to the BLS. As the BLS numbers are based on those who continue to draw unemployment compensation, it is actually not known how many people are really out of a job or had to accept a low-paying or part-time job to keep their head above water.
“Corporations have to downsize when they have no customers. As they shed workers, they shed customers, as they shed customers they must shed workers—it is the quintessential vicious circle leading to structured unemployment of the work force,” according to the unemployment article.
Commercial Real Estate Stagnating
The commercial real estate sector is experiencing a huge buyers’ market.
“Commercial real estate sectors, hurt by weak job growth, are offering incentives in many areas that are conducive to business expansion,” according to the National Association of Realtors (NAR).
Although a slight improvement was noted by the SIOR Commercial Real Estate Index, published by the Society of Industrial and Office Realtors (SIOR) in the commercial real estate sector, it was only achieved by landlords and sellers lowering prices significantly, giving rent discounts and other incentives.
“Looking at the overall market, vacancy rates will shift modestly in the coming year,” predicts the NAR. However, according to expert opinion, unless the unemployment situation improves, the prediction may not materialize.
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