Real estate downturn hits the economy

The strong economic recovery highlighted in this post has stalled. I assumed a reversal in housing activity to slow down the entire economy but still remain in positive growth. That is now being tested with negative results showing up in some key reports.

Leading indicators (July 2010)

The composite leading index slowed to a 0.4% increase in July, after a gain of 0.7% in June. Most of the slowdown originated in the household sector, where three components fell. None of the seven other components decreased.

Jobs (July 2010)

The number of workers in the education sector was down by 65,000 in July. The large drop in educational services in July was spread across several occupation groups, including educational assistants, teachers and administrators in primary and secondary schools as well as custodial staff.

In July, employment decreased in finance, insurance, real estate and leasing (-30,000), bringing employment in this industry back to its July 2009 level.

(I expect next months report to be better because the loss of 65,000 educational jobs is unlikely to be repeated)

GDP (May 2010)

Sales of existing homes fell significantly in several parts of the country in May, resulting in an 11.3% decrease in the output of real estate agents and brokers. This marked the fifth consecutive monthly decline in this industry.

The question is whether this is leading to a double dip recession or just a slowing in the rate of growth.