A careful look at these statistics shows that a serious deterioration is taking place in the labor base of our country. Not too many years ago, the American government had a philosophy of full employment as a goal. Today that’s not even a dream. There are no unemployment rates in the 1% or 2% range. Unemployment in the 3% range has occurred four times since 1958. The last time was in 1969 (28 years ago). An unemployment rate of 4.5% or lower has occurred eight times (including the four in the 3% range) since 1947. The last time was in 2000 (years ago).

From 1958 through 2007 (50 years), an unemployment rate of 6% or more occurred nineteen times. The average percentage of unemployment increased for each decade from 1958 to the 1987. These increases are illustrated in the bar chart below: 1958-1967 - 5.35%; 1968-1977 - 5.93%; 1978-1987 - 7.38%. The two decades of 1988-1997 and 1998-2007 saw respective declines to 5.93% and 4.9%.

The decline in the average unemployment rate for the past two decades is misleading. The unemployment rate is a percentage that is calculated by dividing the number of unemployed people by the number of people in the labor market. The problem lies in getting accurate information regarding the size of the labor market. The last two decades have born witness to the technological explosion and the United States moving from a socio-manufacturing economy to a socio-service based economy. To quote a recent
Presidential candidate, “Those jobs aren’t coming back.”

The computer has eliminated hundreds of job types and put millions out of work. The computer has also created millions of jobs. Because of the efficiency of the computer, job creation hasn’t kept up. An economic truism is as follows: The force of people losing jobs tends to create more unemployment.

The demand for accurate information regarding the size of the job market has forced the Department of Labor to create a new category: Not In Labor Force (NILF). When the number of people that left the labor market is subtracted from the total labor market, the unemployment rate increases. The real unemployment number is a matter of continuing debate. NetGain believes it is high enough to warrant the following conclusion: The long term trend of unemployment in the United States is increasing.

The current condition and trend of unemployment in the United States is a serious drain on society and the real estate industry. Why? History has demonstrated that human beings have an inborn desire to be productive and needed. Unemployment reduces productive activity and eliminates the feeling of being needed. The consequences are that unemployment breaks down an individual’s self esteem and confidence, which ultimately affects the morality and principles of a society. Following are some examples of
the direct results of unemployment:

• Increased crime
• Higher health care costs
• Deterioration of real property
• Decline in retail sales
• Fewer taxes collected by government
• Poorer quality of education
• Losses in the drug war

There are answers to the unemployment problem. With the right ideas and plans, our country has the ability to create productive jobs for its employable population. In fact, instead of being a drain, this increasingly huge pool of unemployed productive people could and should make significant contributions to our country.

The affect of an increasing unemployment base on commercial real estate is so profound that everyone directly or indirectly involved in the real estate industry needs to be aware of its current state and direction. The unemployment issue will not disappear by itself. Solving the deteriorating labor base in our country will only come from proactive planning and actions. To the extent that the current city, state, and federal administrations are unable to develop programs that will create productive jobs, the real estate industry must exercise extreme caution in all its due diligence activities. All important conclusions should be based on substantial evaluations. Finally, all real estate investors have to concentrate their efforts in those areas that have or will have a sound employment base with an increasing need for jobs.

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