It remains very hard to know where we really are. On the one had the new jobs numbers look better, but the breakdown of part time vs well paying full time is unclear. In the new jobs numbers are a high percentage of part time and low paying in hospitality and other low end service jobs. Underneath the headline numbers is still the harsh reality that vs the population rise, the number of new jobs being created is still quite a distance form really making a difference to most middle class workers. U6 is still above 11% and the participation rate is still near historic lows. The average family is still around 8% below 2007 adjusted for inflation and 8.7% below 1999, the peak. In 1988 the typical middle class household was headed by a white male married to a white female with two kids. He was 40 and had a high school education. Today there is a wide mix of education, race, and a lot less married households. The good news is many households today do not have two kids and the female works in the majority of cases. So there are less mouths to feed and a second income. However, the combined household income is still behind 2007. In short, the middle class has gone nowhere since 1999, and they have little savings or retirement funds. Many have school debt their parents never had and they are just coming off the crash which decimated their incomes and asset values. If they own a house it may or may not be back to 2006 values depending on where they live. Food prices are up a lot and now digital devices consume a sizable cost per month.

None of this is good for the economy, nor for housing unless you are into multi. It suggests that buying a house is not likely for many for quite awhile, if ever. That is why home ownership is at a near record low, and is likely to remain there for a long time. Rental has a good future, but rent levels may get constrained in many markets so units need to be constructed that recognize the income limits of the average household. Although jobs are increasing, wages adjusted for inflation is barely rising. The increase in January is largely due to the one time boost in the minimum wage in many states, but that is now embedded so will not provide another increase from here on.

Consumer confidence may be up a lot, but after they buy their new car, new smart phone and higher food costs, and they pay down their debt, they don't have much left. That will likely improve, but not by much for a few more years. It is why the lower gas prices have not shown up much in spending. It is being used to pay off debt or save for a house or other things. Don't get all hyped up by thinking the gas prices are the panacea, or that lower unemployment headline numbers matter. They don't make any real difference, and unlike before the crash, there are barely any home equity loans or other ways to over spend, which ran up the economy prior to 2008. If you then note that oil prices might have bottomed and maybe will rise again, and the geopolitical situation continues to deteriorate, and we have a president who seems disconnected from realty, then I do not believe it is time for any sort of euphoria or risk taking. Better economic numbers are just relative. It is like a guy getting beaten up. When the beating stops he thinks life is better, but he does not know if the beating may start again at any moment. Putin and Islamic terrorists can send the economy into a bad place in an instant with their next act of killing and terror. Oil prices might rise again to $70 or some other number when the reduction in rigs really takes hold. Then all of the expected gain from lower gas prices goes away-poof. In February the layoffs in oil related industries will really hit and those are mainly high paying jobs.

We are far from the good time again.

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Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.