Numbers to Ponder
1. Banks have an inventory of about 1 million foreclosed homes, plus another 5 million homes where the loans are badly nonperforming.
Any way you look at it, that is a huge overhang. My wife has an uncle who is an independent home builder near Norfolk, Virginia. He has built only two houses in the past few years, and neither one has sold. Some unsold homes in his neighborhood have been marked down 40 percent from when they were first put on the market, with no buyers. I remember seeing a lot of foreclosures in his neighborhood when we visited a year ago.
My personal opinion is that the foreclosure backlog is the biggest reason to be pessimistic about the economic outlook. If I were in a policy position, I would be trying to get these foreclosures through the system as rapidly as possible. Trying to prevent foreclosures is simply a futile effort. It does nothing but keep the market out of equilibrium longer.
2. Speaking of good news, Matthew Slaughter has calculated that if employment recovers as slowly as it did after the 2001 recession, it will take almost 10 years to recover the jobs lost during this recession. He has some other interesting numbers (click on the second link, above).
Again, my view is that so far the 21st-century has been shedding a lot of the 20th-century work force. This is a painful process, and I am not convinced that government can do much about it. By the time the economy gets back to full employment, it will look very different than it did in 1999.