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Real Estate Market Commentary - October 2012
by Peter L. Zachary, MAI, MRICS

Commentary on the Real Estate Market as of October 2012 By Peter L. Zachary, MAI

There was good news on the job front this month. For the first time in four (4) years jobless rates have dropped. In an article from the New York Times on October 5th, 2012 titled “Drop in Jobless Figure Gives Jolt to Race for President” it stated: “The jobless rate abruptly dropped in September to its lowest level since the month President Obama took office, indicating a steadier recovery than previously thought and delivering another jolt to the presidential campaign.

The improvement lent ballast to Mr. Obama’s case that the economy is on the mend and threatened the central argument of Mitt Romney’s candidacy, that Mr. Obama’s failed stewardship is reason enough to replace him. Employers added a modest 114,000 jobs last month, the Labor Department reported on Friday, but estimates for what had been disappointing gains in July and August were revised upward to more respectable levels.

Unemployment fell to 7.8 percent from 8.1 percent, crossing what had become a symbolic threshold in the campaign. Mr. Romney was deprived of a favorite line of attack, mocking the president for “43 straight months with unemployment above 8 percent.”

It continued to say “The jobs report was preceded by other signs of growing economic strength, including a jump in consumer confidence, the strongest auto sales in four years, rallying stock prices and, at long last, a stabilization of housing prices. According to the monthly survey of employers, the bulk of the gains came from service jobs, particularly in education and health care. Though government downsizing has been a drag on the recovery, government over all added 10,000 jobs in September, the third consecutive month of gains.

The nation’s employers have added an average of 146,000 jobs a month in 2012, just ahead of the numbers that are considered necessary to absorb new workers into the labor force.” It then stated “The nation now has nearly the same number of jobs as when Mr. Obama took office in January 2009. Since the economy stopped hemorrhaging jobs in February 2010, there has been an increase of more than 4.3 million. A mere 61,000-job increase would allow Mr. Obama to claim a net gain in jobs over his tenure”.

However, the good news for the overall jobless drop in the rest of the country has not blown over in New York. An article in the New York Times entitled “New York’s Rising Jobless Rate Poses Test for Cuomo” on October 16, 2012 stated: “While the nation’s unemployment rate has been declining over the last year, New York State’s has been rising sharply, presenting a challenge for Gov. Andrew M. Cuomo as he tries to build an image as a fiscal centrist who can transform the state’s business climate. Over the last 12 months, New York has been the only state with a statistically significant increase in its unemployment rate, according to the Bureau of Labor Statistics. As of August, the state’s rate had climbed to 9.1 percent from 8.2 percent when Mr. Cuomo took office in January 2011, a reversal of the national trend, according to the federal household survey.

In every corner of the state, there are trouble spots. In the Bronx, the unemployment rate is nearly 14 percent. Along Lake Ontario, in rural Orleans County, shrinking manufacturing jobs and government payrolls have pushed unemployment to more than 11 percent. In St. Lawrence County, in the northern Adirondacks, the rate is also 11 percent.” It went on to say, “Economists offered a range of theories about the reasons that unemployment and payroll numbers diverged in New York City, statewide and, to a lesser extent, in other parts of the Northeast. There are notable differences between the surveys: the unemployment data is based on a household survey that reaches the self-employed and people who work in agriculture, but the payroll survey is not. Some said the unemployment survey had shortcomings, particularly the relatively small number of people interviewed — about 2,330 in New York State.

Two senior officials at the New York Federal Reserve Bank, in a blog item posted on the Fed’s Website last month that focused on the New York City economy, explored and dismissed a few possible explanations for the divergence between the unemployment and payroll data. “While there are several potential explanations, the stagnation of resident employment remains largely a puzzle,” wrote Jason Bram, a senior economist, and James Orr, an assistant vice president in the regional analysis group. “There seems to be no single overriding explanation for the gap between the two employment measures,” they added. “Other indicators of the city’s economy are indicating a healthy recovery, particularly the low office vacancies and rising rents.”

Also, “Mr. Cuomo has talked frequently of the importance of job creation and economic development, but he has been in office less than two years, so the impact of some of his initiatives may not yet have been fully felt. He has governed as a fiscal centrist, championing laws that imposed a cap on property tax increases and lowered pension benefits for new state workers. This month, he has been conducting bus trips around the state to show off economic development projects receiving state aid. But he has his work cut out for him. While the state budget is finally coming under control after years of outsize deficits, a growing fiscal crisis among New York’s municipal governments is likely to put the state under stress. Last week, the Tax Foundation, a nonpartisan research group, ranked New York last among the 50 states for its business climate.”

Lets hope that New York starts to show signs of improvement and catches up to the rest of the country very soon. Still, we can't help but hope for continuing good news next month.

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