US Economy going down

[Rajesh Pore]

Hi All,

Analyst are talking about early sign of US Economy slow down.Would like to know how this will affect software jobs in US.Is it worth to leave a job in India and move to US in this condition.


Regards
Rajesh

[Mark Herschberg]

2005 and 2006 have been fantastic years for the US economy. Some say it's doing great. Some say we're in for a soft landing and goldilocks economy. Some say we're in for a recession. You need to decide how likely each is and how comfortable you are working in such an environment.

--Mark

[Jason Cox]

http://apnews.myway.com/article/20061005/D8KIO4AG0.html

The DOW has been at a record high. I could switch jobs next week and get a $10K pay raise (I like my company though and was just offered an assignment as an architect, so I'm not going anywhere just yet). These are not indicators of a bad economy.

Oddly enough, as I was rolling off my last assignment the subcontractor, who is from India, said they were considering going back because that is where all the jobs were heading anyway. I'm surprised that meme is still going when hiring in Dallas is so strong. Dallas, which was hit so hard by the bust, is on a serious rebound. It won't last forever, because that is how the economy works, but it's also not exactly a bad sign.

I'm not sure where all the doom and gloom about the economy is coming from.

[Eric Lemaitre]

Hi Rajesh !

Analyst are talking about early sign of US Economy slow down.Would like to know how this will affect software jobs in US.Is it worth to leave a job in India and move to US in this condition.

With the housing bubble in the process of busting, whole US economy will shrink by about 1% growth, so whole business will shrink a little. As usual, most vulnerable contractors will be used as adjustment variable, especially newest H1B without prior US experience. So you should stay in India and enhance your skills there, it is much safer.

Best regards

[Anand Prabhu]

Whichever way the US economy moves, the Michigan economy moves only one way. Down. I have been hearing for the past 4 years that the Michigan economy had hit the bottom but the goalpost seems to be moving further down. We knew GM, Ford, Delphi, Visteon, etc were in the dumps. Now we read that even DaimlerChrysler was not keeping an eye on its inventories and had a 1.5 billion dollar loss for the last quarter. And with Union negotiations due next year, I am expecting a hard landing here but wonder if that would still be the bottom. The hiring is modest but that is because many of the skilled people have fled town.

[Eric Lemaitre]

Hi Anand !

Whichever way the US economy moves, the Michigan economy moves only one way. Down. I have been hearing for the past 4 years that the Michigan economy had hit the bottom but the goalpost seems to be moving further down. We knew GM, Ford, Delphi, Visteon, etc were in the dumps. Now we read that even DaimlerChrysler was not keeping an eye on its inventories and had a 1.5 billion dollar loss for the last quarter. And with Union negotiations due next year, I am expecting a hard landing here but wonder if that would still be the bottom. The hiring is modest but that is because many of the skilled people have fled town.

This is a special case, as Michigan economy relies very heavily on car manufacturing. But despite it has been a well known fact since years that oil price would climb very high which for long would made havoc in US car industry which had only high consumption vehicules while asian concurrents had many low consumption models in their catalogs, nothing was ever done by US bosses to add low consumption models to theirs.
Simple demonstration of how incompetent US bosses may destroy a whole local industry with hundreds of thousands of jobs at stake by complete lack of foresight (while concurrents DID foresee it easily).
It takes years to design a new car model. US car making craftsmen jobs will carry on vanishing meanwhile, hopefuly hoping new low consumption car models design has began in US car industry now that it has become obvious it is a necessity, but what a waste of time and jobs...

Best regards.

[Jason Cox]

Originally posted by Eric Lemaitre:
With the housing bubble in the process of busting, whole US economy will shrink by about 1% growth, so whole business will shrink a little. As usual, most vulnerable contractors will be used as adjustment variable, especially newest H1B without prior US experience. So you should stay in India and enhance your skills there, it is much safer.

Not sure where you are getting your information from. There is a housing bubble in some parts of the country but it is not happening across the country. For instance there is a serious bubble in the northern part of Virginia with houses going for three times what they would here in Dallas, Texas. The Dallas housing market doesn't seem to be any worse for wear right now, nor is it in any serious jeapordy in many parts of the country.

One thing our news media continues to get wrong is to report on things happening in the coastal areas of the country as if it is happening across the nation. I am hearing complaints about housing prices and the potential for a bubble to burst but only from certain regions.

Here's some good information as well -

http://www.businessweek.com/bwdaily/dnflash/jun2005/nf20050622_9404_db008.htm

I'm not saying everything is just peachy keen and coming up roses, but again I don't understand all the doom and gloom either. We are nowhere close to the dotcom crash and post 9/11 days. The economy does not always trend upwards. If there have been any problems that's ok because that is part of the normal process.

[Rachil Chandran]

the last time the us economy did go down (and .com bubble burst), there were serious repurcussions in the indian IT job market.

i was in college doing my undergrad at the time and difference (atleast in the number of freshers hired on-campus) in hiring was evident.

now the US economy is up and the job market in india is booming.

does this look like a mere coincidence?

[Pradeep bhatt]

Stock market is all time high(?), housing boom as well.I met one guy who had purchased a house in 2003 in Seattle and is now valued 3 times more.

[Eric Lemaitre]

Hi Pradip !

Stock market is all time high(?), housing boom as well.I met one guy who had purchased a house in 2003 in Seattle and is now valued 3 times more.


Without any offence, this stating is not meaningful at all. There is an huge difference between something WORTH a given amount of money and something ESTIMATED by market a given amount of money. When market overestimates value of goods it is a bubble, which may create havoc if overestimation is too high and it bursts suddenly, and may be very harmful even if it decreases slowly. If this guy's house is valued 3 times more by market now, it may be valued 5 times less within one year as well if housing buble collapses.

Just a hint to show begining present household bubble deflation may cause great damage to US economy, since it looks like US people have contracted debts through house mortage for some 10 trillions U.S.$ (10,000,000,000,000 U.S.$) of completely artificial wealth which won't be part of real economy when time to pay debt back will come :

Housing Bubble Smack-down

[Luke Kolin]

Originally posted by Eric Lemaitre:
it looks like US people have contracted debts through house mortage for some 10 trillions U.S.$ (10,000,000,000,000 U.S.$) of completely artificial wealth which won't be part of real economy when time to pay debt back will come:

SmirkingChimp.com? Those guys make Rush Limbaugh look fair and balanced.

When you get outside of California and Florida, there are wide swathes of the United States that don't have overvalued housing and where no crash is going to occur. Keep in mind as well that the price of a house is arbitrary, and that works on the way down as well as the way up. If my house is "worth" $250,000 or $300,000 or $350,000 that won't affect my monthly payments, and I'll have no obligation or compulsion to sell.

Cheers!

Luke

[Sumit Chopra]

If US economy slows down then would it not have a cascading effect on India too? The IT spending in US will go down and naturally that would diminish Indian IT exports thereby affecting Indian companies' revenues.

I am no economist, but may be this could happen.

[Pradeep bhatt]

Without any offence, this stating is not meaningful at all. There is an huge difference between something WORTH a given amount of money and something ESTIMATED by market a given amount of money. When market overestimates value of goods it is a bubble, which may create havoc if overestimation is too high and it bursts suddenly, and may be very harmful even if it decreases slowly. If this guy's house is valued 3 times more by market now, it may be valued 5 times less within one year as well if housing buble collapses.

Makes sense.

[Eric Lemaitre]

Hi Sumit !

If US economy slows down then would it not have a cascading effect on India too? The IT spending in US will go down and naturally that would diminish Indian IT exports thereby affecting Indian companies' revenues.
I am no economist, but may be this could happen.

No, not in this case.
The US housing bubble deflation will affect US middle class only. India sells many services to US companies but very little products relative to US middle class consumption (but China does), so there shouldn't be any effect at all logicaly for India.

[Eric Lemaitre]

Hi Luke !

SmirkingChimp.com? Those guys make Rush Limbaugh look fair and balanced.

I know their opinion is very oriented against republicans, but as an Engineer I always try anyway to remain balanced by considering other opinions too and have my own conclusion about their figures and polls. Figures never are biased, but their interpretation may be, as long as I remain councious of it, it is fine.

When you get outside of California and Florida, there are wide swathes of the United States that don't have overvalued housing and where no crash is going to occur. Keep in mind as well that the price of a house is arbitrary, and that works on the way down as well as the way up. If my house is "worth" $250,000 or $300,000 or $350,000 that won't affect my monthly payments, and I'll have no obligation or compulsion to sell.

In Europe we only have glimpses of real US situation, but the US housing buble issue was stated by many economic newspapers here. It looks like issue is much more widespread than you think, not only usual overvalued places (New York, California, Florida), but almost any big US town, such as Boulder (Colorado) for the example chosen.

The real issue in fact, if I understood it properly, is about a vicious trick practiced by foul mortage lenders : they granted money lendings based on the overrated housing values, so they somewhat granted kind of new debt based on old debts, much beyond customers payback capacity if housing values decreased.

Of course economics experts opinions vary, but I personnaly trust Joseph Steiglitz who foresees a hard soft-landing. This is expected to cost 1% growth to US for years to come, so lowering US growth to some 2.5% a year. Wait and see...

[Arjunkumar Shastry]

Originally posted by Rajesh Pore:
Analyst are talking about early sign of US Economy slow down.Would like to know how this will affect software jobs in US.Is it worth to leave a job in India and move to US in this condition.
Regards
Rajesh

As Eric said,currently it makes sense to stay and not to move there atleast for a few months.Almost every company from AirBus to Yahoo! to casino development companies have open the shop here and looking for people.Till bubble burst here,get the experience.

[Luke Kolin]

Originally posted by Eric Lemaitre:
I know their opinion is very oriented against republicans, but as an Engineer I always try anyway to remain balanced by considering other opinions too and have my own conclusion about their figures and polls.

Then you should do yourself a favour and quote more balanced and reputable sources if they say the same thing. Claiming references from a site that is little more than a partisan hack job makes people suspect the quality of your argument.

Figures never are biased, but their interpretation may be, as long as I remain councious of it, it is fine.

You have obviously never heard the phrase "lies, damn lies, and statistics!"

It looks like issue is much more widespread than you think, not only usual overvalued places (New York, California, Florida), but almost any big US town, such as Boulder (Colorado) for the example chosen.

There are vast swathes of America where housing was never in a bubble, but have been consistently going DOWN. All through the rural midwest and northeast. Southern property values when compared to rent (the orthodox way of measuring a bubble) are actually in balance or undervalued in many places, my own city included.

I would be exceptionally leery of looking at external sources for catching glimpses into a foreign nation especially when not balanced with local sources. If I had done so I would be convinced that every car and bus in France had been burned in the rioting last year.

The real issue in fact, if I understood it properly, is about a vicious trick practiced by foul mortage lenders : they granted money lendings based on the overrated housing values, so they somewhat granted kind of new debt based on old debts, much beyond customers payback capacity if housing values decreased.

You don't understand how it works - the value of the house is utterly irrelevant when it comes to its affordability. If I buy a house for $250,000 how much I pay every month doesn't change. The house could triple in value to $750,000 (or conversely, sink to $50,000) and how much I pay would not change one bit. So why would things be beyond "the customers payback ability if housing prices decrease?" The two are completely different.

While modern mortgage lending has some unsavoury aspects to it, it by and large does work very well at diversifying risks and ensuring that a bubble in a small area doesn't completely kill local banks.

This is expected to cost 1% growth to US for years to come, so lowering US growth to some 2.5% a year. Wait and see...

I'd be far more concerned about the effects of decreased construction than on a deflating housing boom. But I will wait and see.

Cheers!

Luke

[Mark Herschberg]

Just a friendly reminder that this should be an open ended discussion about the US economy, but rather one relating to the job market. This was not sparked by any post in particular, just a reminder since the thread was restarted.

--Mark

[Eric Lemaitre]

Hi Mark !

Just a friendly reminder that this should be an open ended discussion about the US economy, but rather one relating to the job market. This was not sparked by any post in particular, just a reminder since the thread was restarted.

Yes, but job market and economy are always intimately entangled in any contry anyway, so I believe all posts were relevant till now.

Here is IMHO a good synthetic resume of present situation, sorry all for reference is in french, so I translated it down :
Etats-Unis: vers un atterrissage en douceur

USA : towards soft landing

White house just lowered to 2.9% its growth forecasting for next year. One must say housing market reversal and restructurations in car industry are driving activity downwards. However US economy should avoid recession thanks to job creations in service field, fed by domestic consumption.

[Mark Herschberg]

Originally posted by Eric Lemaitre:
Yes, but job market and economy are always intimately entangled in any contry anyway, so I believe all posts were relevant till now.

It also turns out that the economy and politics are intimately entangled, but we're not going to discuss that here.

A general economic discussion is something I would find imminently fascinating, but it's also not what this forum is about. Fortunately, we have a better place on this website for it. I'm not saying this thread needs to stop, just that this discussion, like all discussions in this forum, needs to be about jobs in some way.

--Mark

[Jason Cox]

I have to say from your somewhat stubborn tone it seems as though you almost want for the US economy to be in trouble despite others giving you evidence that it's not necessarily the case.

The housing bubble is not a national phenomenon by any stretch but there is severe danger of a housing bubble in certain parts of the country. I have seen this first hand from my travels in the past two years. North Virginia is begging for a bubble to burst, but I don't see any real rise in housing costs where I am living and there has been little concern. Our typical doomsayers (ie: the news media) have been incredibly quiet.

I agree that if the economy tanks, jobs will be lost. However, don't mistake a dangerous situation for becoming a repeat of the dotcom bust. What it likely means is that jobs will become harder to find in areas of the country where real estate does not return to realistic levels before hitting a crisis.

That said, it will not be the first time where one area of the country is having difficulties while other areas are chugging along just fine. That is the beauty of the US and something our own media overlooks all too often. We are large enough and diverse enough that one bad thing happening in one region does not necessarily reflect what is happening in all regions.

[Tim Holloway]

I don't think the housing bubble is as ominous a predictor of economic catastrophe as some think is is. I live in Florida. We've seen quite a bit of subsidence in housing prices over the last year, but the overall unemployment rate for the state is better than most of the country, I believe, and (more selfishly) I think the local tech job market is in better shape than it has been since the year 2000.

Also, just in practical terms, housing is different than most speculative markets like stocks, gold, commodities, etc. It has a certain "inertia" that they don't. Housing isn't as liquid a commodity - it takes much longer to sell. And creditors are extremely reluctant to take it over (foreclose), since then not only do they have a drag on the books, the property has ongoing upkeep expenses as well as taxes, fees, insurance and the like. Houses take up a lot of space. You can't cram them into a vault and dole them out at leisure. I could go on, but I think you get the idea.

Finally, while a certain amount of the bubble was churn and vacation properties, the bulk of the houses out there are residences. There are few other investments where people find it a difficult choice of giving up a job to keep an investment vs. giving up the investment for the sake of keeping a job.