Lisa Simpson
Jul 15,2010
In: Foreclosure

Unemployment and Housing Sector

Unemployment and Foreclosure are directly related.

Unemployment and housing sector clouds are adding to the risk of recovery for the economy of USA. Meanwhile the sovereign debt is taking on threatening proportions according to a recent statement by the International Monetary Fund.

After the yearly discussions with the relevant authorities the IMF stated that the growth will be around 3.3% in 2010 and 2.9% in the next year. But the jobless figures would persist at more than 9% for both this year and the next one.

The staggering unemployment figures combined with a staggering pile up of residential foreclosures, high levels of negative equity are posing risks. The housing market may take a ‘double dip’. However the IMF waived off the possibility of another recession. The statement stated, “The outlook has improved in tandem with recovery, but remaining household and financial balance sheet weaknesses – along with elevated unemployment – are likely to continue to restrain private spending”.

The IMF also pointed out that the commercial property sector is facing deterioration causing the smaller banks to be gravely concerned. Aggravating the situation further is the debt crisis in Europe. This could weaken again the financial market and negatively impact on trade.

David Robinso, the Deputy Director of IMF (Western Hemisphere) admitted while talking to the press that the latest data indicated more weaknesses since the statement was compiled on 21st June. If this weakness persisted IMF could have to review its predictions pointing more downwards.

In another statement the IMF referring to the global economy said that growth prediction for 2010 was 4.6%. In April the forecast had been 4.2%.

The IMF said the risk the economy was facing was the main challenge before the country. It was imperative for it to chalk out a workable plan to place the budget on a path that would be sustainable without hampering the nascent recovery.

IMF predicted that the sovereign debt in relation to the GDP would increase from 64% this year to 80.4%, to 96.3% and 135% in 2015, 2020 and 2030 respectively. The forecasts about the debt are higher than what the Obama government has presented – 77.4% and 90% for 2015 and 2020 respectively.

A spokesperson for the Treasury said that the predictions by IMF were “overly pessimistic”. For instance the IMF had forecasted 2.8% in 2012 as compared to Blue Chip that had put it at 3.4% for the same year.

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