As we approach the end of the year, there was a recent announcement by the major media outlets that the unemployment rate 2011 took an unexpected, but welcome, dip to its lowest level in two and a half years from about 9%, where it had been for most of the year, down to 8.6%.  This news is based on a recent story by The New York Times, a well-respected and widely-circulated newspaper.  Also, in that same story, the opening sentence states, verbatim, that “Somehow the American economy appears to be getting better, even as the rest of the world is looking worse.”

Y’know, in the words of a friend of mine back home, “I may be dumb but I ain’t stupid”.  I don’t buy that this small dip in the unemployment rate 2011 is a sign that our economy is getting better or that commercial finance is getting any easier.  Not by a long shot.  Despite the downtick in the unemployment rate 2011, Bank of America and other big players in the lending game plan on laying off tens of thousands of employees within the next few years, the European debt crisis is still out of control, and we still have gridlock in our government regarding the unsolved budget issues that regularly threaten a government shutdown as our politicians maneuver for political positioning going into the 2012 election year.  As a side note, there has always been an uneasy friendship between our politicians and the media.  Our politicos need the media to portray them in a good light so that they can have job security and, in return, the media needs cutting-edge information from our elected officials so that they can sell this information to us, John Q. Public, and stay in business and have job security, themselves.  It’s just as well that I don’t watch TV because of all the misinformation and economic sleight-of-hand that’s constantly tossed out at us, especially with the unemployment rate 2011.

Let’s get back to a bit more of an in-depth look into how our government determines the unemployment rate 2011 and its effects on commercial finance.  The unemployment rate 2011 has been a significant concern and is a statistic that has been placed before us many times.  Indeed, this has yielded supporting data for trying to determine the health of our economy for this year and lender sentiment regarding the finance of real estate and businesses.  But just how important has the unemployment rate 2011 been in determining the health of our economy this past year?  I think that people placed too much emphasis on this one metric and not enough on other information.  I’m not an economist by any stretch of the imagination but I do know how to balance a checkbook.  All it takes to balance any checkbook is a solid mastery of 5th-grade math, i.e., basic addition and subtraction.  If we look back to just a year ago, online news sources trumpeted how unemployment claims had dropped to their lowest levels since 2008 with the not-so-subtle implications that things were looking up and that our economy was on its way to a slow, but steady, recovery.  Gee, that’s funny.  I haven’t seen much change since then.  This reminds me of a quote that has been attributed to former President Herbert Hoover who supposedly told businessmen in the middle of The Great Depression in 1932 that “Prosperity is just around the corner” when, in reality, the only things just around the corner for another 10 years were people selling apples and pencils.

If we look at how the unemployment rate 2011 is determined by our federal government, maybe you will see the same flaws in the data collection techniques that I see.  Let’s forget for now that, in terms of just pure numbers, a person who is employed and being paid the federal minimum wage of $7.25 an hour carries just as much weight, statistically, as an attorney or medical doctor who typically gets paid $200 an hour and higher for their time in determining the unemployment rate 2011 which renders such numbers as being almost completely useless for determining the overall health of our economy.

When determining the unemployment rate 2011, a nationwide survey of 60,000 households, which is approximately 110,000 people, was done to represent our entire country of over 300,000,000 people.  Now I know that basic statistics tell us that this is valid since a sample size of 110,000 people is supposed to be large enough to represent a normal statistical distribution from which reliable results can be interpreted, but somehow dis here theoretical, egghead stuff just don’ make no sense to dis country boy.  C’mon, there are college football stadiums that can hold 110,000 people.  How can a sample size of people, who can all cheer at once and in one location for Michigan to beat Ohio State, possibly give a reliable indication of the true unemployment rate 2011?  The answer is that it can’t.  Not only can there be significant errors in choosing sample households that truly represent our entire country’s population, sometimes the surveyed people can be incorrect by being knowingly or unknowingly dishonest.  Remember when the media used statistics on a limited population to erroneously predict and proclaim that Thomas Dewey defeated Harry Truman in the 1948 Presidential election?

Other flaws in the methodology for determining the unemployment rate 2011 include how our government determines who is employed and who is unemployed.  For example, there is an official employment category called “unpaid family workers” which includes any person who worked without pay for 15 hours or more per week in a family-owned enterprise operated by someone in their household.  This could be little Jimmy or Susie who work for mom and dad by taking out the garbage and doing other “home business” chores each morning before getting on the bus to go to school.  Now I’m not against having kids learn the value of hard work, especially when it contributes to the good of the family, but I deem such a classification of “employment” to be irrelevant in trying to determine where our economy is going and this classification shouldn’t be used in determining the unemployment rate 2011.

The unemployment rate 2011 can be helpful in determining the health of our economy and the status of commercial finance.  But the bottom line is always going to be what is the income versus the outgo, i.e., what are the net incomes to our government and to us as citizens.  The unemployment rate 2011 should be put into its proper perspective as ancillary data and not heralded on the front pages of all the major newspapers.  I recently read in the December 12/19, 2011 issue of Jet Magazine on page 14 that at least six cities (Cincinnati, Ohio; Topeka, Kansas; Highland Park, Michigan; New Rochelle, New York; and Camden, New Jersey) have drastically cut vital services, such as police and  other public safety, since they just don’t have the money to sustain them.  Even if these cities had 0% unemployment but all the jobs were of the minimum wage kind, I seriously doubt that the tax revenues could sustain the services necessary to keep their populations safe and secure, much less finance necessary commercial projects to jump start their own local economies.  This is why the recent unemployment rate 2011, as much publicity as it received, isn’t much more than a footnote in my mind.

Now that I’ve done a bit of complaining about how misleading the unemployment rate 2011 can be, I believe that for every complaint we put out, we should always counteract it with at least one possible solution to whatever ails us.  Ergo, I’d like to put out one or two possible solutions for thought.  Insomuch as our government is concerned, just looking at revenues and expenses should tell us all we need to know.  For example, a previous blog post of mine showed that the Obama Administration spends much more than it brings in.  Simple math tells me that just ain’t gonna work.  A quick look at our governments’ finances and a little math tells me that we’re still in a recession, even though the recession supposedly ended in 2009.  Since there is some lag time from when our federal government acts to when the effects of those actions are felt by us at the local level, my crystal ball tells me to factor in a deteriorating economy for major purchases in the commercial real estate arena, especially those that depend on the government to finance any portion of these acquisitions.

So what would I do to determine local economic conditions and how it affects my ability to get a lender to finance my real estate acquisitions?  What esoteric charts and data tables would I recommend looking at to see how the economy will affect real estate and business finance?  I say none.  Just pick up the phone and stay in regular contact with your lenders.  Be careful with this one now.  A mortgage broker is not typically a direct lender so if you call a mortgage broker, you may or may not be getting the most up-to-date information since the mortgage broker may be giving you outdated information, especially if they haven’t originated any loans recently (ask me how I know this).  It’s best if you can call the direct lenders and ask them what programs they still offer to finance your projects.  Back in 2007, I was considering the acquisition of some residential properties with the main exit strategy being to rehab them and then flip them for a profit.  A friend of mine, Scott Lane, who is the co-founder of our local real estate investment association in Columbia, South Carolina, the Capitol City Real Estate Investors, told me to be careful since his lenders told him that they were no longer offering certain loan programs.  I foolishly disregarded what Scott said and am now stuck with a few properties that I don’t want.  The moral to this story is to lead with the financing.  First find out who will finance your acquisitions and on what terms, and then make offers based on what you know that your lenders will finance.  Please note that nowhere in this paragraph, other than now, did I mention the importance of the unemployment rate 2011 or any other widely-heralded government data.

As is customary with my blog posts, I’d like to put out a few leads presently on my radar for anyone to work and maybe to pick up a good deal or two:

In a nutshell, I don’t find much of a correlation between the overall unemployment rate 2011 and commercial finance unless there is a large portion of unemployment being contributed by commercial lenders so don’t let that statistic, alone, determine your view of the economy.

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