Economist Says Brighter 2012 Could Be On The Way

MINNEAPOLIS (WCCO) — Take a look at any construction site across Minnesota and you’ll see our economic recovery in the works. What’s obvious with every building going up and every load of concrete delivered, is that more and more Minnesotans are going back to work.

Jim Paulsen, a capital management economist with Wells Fargo, said employment is the key to continued recovery.

“The thing we’re going to get in 2012 that we haven’t had up to this point is a sort of slow and steady decline in the unemployment rate,” said Paulsen.

In fact, he said it’s very possible that the nation’s unemployment rate will dip below 8 percent for the first time in a long time. Paulsen believes that the country will add jobs at a rate of more than 200,000 per month in 2012, a pace that is about double what was being created in 2010.

As more Americans go back to work, it builds confidence among consumers and employers and removes some of the fear that’s been driving the markets.

“I think if that chatter goes away, even if it’s not robust but sustainable, then suddenly the housing market looks better and people will go, ‘Well maybe we can buy that new house,'” Paulsen said.

Realtors are taking a more cautious approach to 2012, including the newly-elected president of the Minneapolis Area Association of Realtors Cari Linn.

“Hopefully we’re going to be turning the corner this year,” Linn said.

Commenting on the latest report from Standard and Poor’s Case-Shiller home-price index, which shows that Minneapolis home prices declined by 2.8 percent in October, Linn said that the inventory of unsold homes is down sharply. She said it’s approaching what is considered to be a “balanced market” of buyers and sellers. It’s that balance of inventory that will eventually pave the way for prices to slowly rise.

“That pendulum is not going to swing way up the other way in 2012. If it does that’s great, but I don’t think that’s going to happen,” said Linn.

Instead, Linn said she expects to see a slight rebound to home prices.

On another front, retailers saw a much-improved holiday season. Sales were expected to be up an average of 3.4 percent from the same period a year ago. Still, not all retailers are reporting robust holiday sales. Sears and Kmart reported disappointing holiday sales and expect to close 100 underperforming stores during the course of the new year.

But clearly, Paulsen said, confidence is slowly beginning to return and consumers are spending again, taking another step on the long road to economic recovery.

“If we develop an attitude in the country that maybe it’s bottomed, then I think you might see a little pop in housing this year,” Paulsen said.

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