Federal Reserve Chairman Ben Bernanke said late last week that the nation's economy is on the rebound and that the recession is "very likely over." The Associated Press also reported that the nation's leading economic indicators rose for the fifth straight month. But here in California, it's hard to find positive economic news. The state's economy remains in the doldrums and there are some indications that things could get worse before they get better as unemployment continues to rise and the housing market shows signs of tanking again.
In August, California's jobless rate jumped to 12.2 percent - the highest on record dating to 1976. It was 11.9 percent in July. In the East Bay, unemployment reached 11.5 percent - also the worst since the state began its current system of record keeping in 1990, according to the Contra Costa Times. And nationwide, AP reported that 42 states posted job losses last month, thereby raising questions as to whether Bernanke and other national economists are being Pollyannaish. The only bright spot in California was the total number of job losses - 13,200 - was less than the 35,800 in July and the 114,000 in February, according to the San Francisco Chronicle.
But the ease in job losses may only be temporary, if the housing market is any indication. In the Bay Area, both the number of homes sold and the price of houses plummeted in August, declining for the first time in four months, the Oakland Tribune reported. The number of houses sold declined 14 percent compared to July, although it was 4 percent higher than August 2008. At the same, time the median home price plummeted 8.9 percent from July to $360,000.
And in the coming months, the foreclosure crisis could ramp up again. According to the Chronicle, thousands of Bay Area homeowners are sitting on adjustable-rate mortgages that are scheduled to readjust upward in 2010 with significantly higher interest rates, thereby making the homes too expensive to afford. ARMs started becoming widespread in 2005 and most are on five-year terms. The problem promises to be especially bad in the East Bay, which ranks third nationally in the total value of ARMs. It also could severely affect middle and upper income residents, because the average price of a home with an ARM is $824,000 in the Bay Area.