Housing is economy's silver bullet, analyst says
There is ever more evidence the recovery is taking hold when it comes to the economy. On Friday, officials announced employers added 236,000 jobs in February. The numbers better than expected.
CBS News weekend anchor Jeff Glor talked about the recovery and more with CBS News analyst Mellody Hobson.
JG: So let's talk first about the jobs news because it was good news, better than expected, but 12 million Americans still unemployed. A lot of them are discouraged workers. Does that get better any time soon?
MH: Yes, it gets better and better. Success breeds success. And the one thing is these discouraged workers who say: "Oh my gosh. There's probably no job for me." They'll start to see that unemployment number continue to drop. They'll start to get more optimistic. And the silver bullet here, the driver is going to be housing-related construction. Housing is the silver bullet. The largest number of unemployed people are construction-related, and as those roles start to fill, and the related industries that benefit from housing also start to grow, we'll see that unemployment number continue to drop and drop and drop. And let's not discount the baby boomers, because many of them are looking at these torpedoed 401k plans after the financial crisis and now they're saying to themselves: "You know what my, 401k plan has actually recovered, its back to where it was if not even higher." So now some of them are saying: "Maybe I won't actually go back to work at all, maybe I actually will retire."
JG: We heard all these warnings surrounding the sequester, right? A lot of warnings came out, but this past week on Wall Street, four record-breaking days. The markets are in new territories right now. How do you square these two things?
MH: We square it by looking at what the market is saying. They've priced in the bad news. Everything about the sequester, everything about the dysfunction that we've seen in Washington has been well telegraphed to us. We've heard about it day in and day out, and the market says, we know about 700,000 potential government jobs that may be lost, we know about a slowdown in the economy that may come. But even with that, what we're saying is that we can ride this out over the long term, because corporate America is in good shape. We're walking off all of the Washington news.
JG: I want to talk more about housing. You mention housing being a silver bullet. This is something that people are watching very closely. This is a housing recovery that you think has taken hold now of everywhere?
MH: It's real. It has legs. This is no longer green shoots -- remember that phase -- we're actually in it and you're seeing it in so many ways, not only home prices have gone up, construction actually starting again, inventory levels are so low right now. There are about 1.5 million houses on the market right now, normally there are about 4 million. So if you just look at people's needs and supply and demand, we're going to start to see new construction.
JG: Better time to sell or by right now, housing?
MH: I actually think it's a better time to buy. I think prices are lower than they will be, so if you're a buyer, I don't think you're going to see these levels again. Next year, and in the year after that, the prices are going to be even higher, so I think I'd be a buyer.
JG: One more thing coming up here in May, Congress starts talking about the debt ceiling again. Last time they talked about the debt ceiling there was a lot of market turbulence, and the Dow says they we're down by 19 percent. Do you expect the same tumult this year?
MH: Possible. But I think we're becoming more and more numb to these discussions. I think the market is saying whatever is going to happen is going to happen and the U.S. economy will adjust to it. It's unfortunate that these sort of events go back and forth, but I think at the end of the day, anything can happen over the short term but over the long term, the trajectory of the stock market is up.
JG: When the great recession hits, there are a lot of people who said: "Look, it's going to take at least five years maybe longer to complete this recovery." How far into the recovery are we right now in your estimation?
MH: Early innings. We are at the early innings of this recovery. It was a very prolonged recession and I think as a result of that we will have a prolonged recovery. We are in the early innings, and especially because we are in the early innings of the housing recovery. Housing took us into this debacle, and it's going to bring us out, but it will be over time.
MH: Years. Thanks!
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