Property Crumble

UK Employment Rate to Sept 09

UK Employment dropped just 0.1% over the summer to end at 72.5.

The unemployment rate increased just 30,000 to reach 2.46m.

So everything is fine in the UK economy?

Perhaps not.

There are two issues here.

Firstly, the number of people working part-time has increased to nearly 1m. This is the highest figure since records were begun in 1992.

Secondly, as the stock markets and house prices are being held up by government stimuli, so it appears that jobs will be too.

The question is this – what will happen when that stimuli is withdrawn? And what will happen to the 1m part-timers?

The answer to this question will tell you what will happen to property prices.

Clearly though, as George Soros argues, there is a reflexivity between these factors. That is to say that if employment remains strong then this makes houses worth their current value. In other words, how the market responds also determines what something is worth – the market is not just a summation of market participants but the largest market participant itself.

With 1m people part-time or self-employed, we have both an encouraging sign of flexibility in the economy as well as the risk that this 1m might shift into unemployment rapidly if economic conditions worsen.

1m people added to the unemployment register could create a sharp property price down turn.

However, assuming that the UK economy crawls along in its current state, then this is unlikely to happen and UK property prices can be expected to reduce slowly over the winter months.