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HOUSING IS INCHING BACK The collapse of real estate lies at the heart of America's economic
problems. House prices have plunged 30 percent since 2006. The drop has
wiped out $7 trillion in homeowners' equity. Millions of construction
workers have lost jobs. Now, there are tentative signs of recovery. Apartment construction is
growing. Construction jobs are slowly returning. Home builders are seeing
more foot traffic and gaining confidence that sales will pick up in the
spring buying season. No one expects another boom. But real estate is no longer subtracting
from U.S. employment. And there's hope among economists that higher sales
could stop prices from falling further by spring. Once home prices stabilize, more people will likely decide it's time to
buy. And consumers who worry less about a loss of home equity -- the main
source of wealth for most people -- are more likely to keep spending. STATE AND LOCAL GOVERNMENT CUTS SLOWING The Great Recession and the housing collapse dried up tax revenue for
state and local governments. Many were forced to lay off teachers and other
public workers. Since December 2008, state and local governments have
slashed 613,000 jobs, offsetting some of the hiring by private companies.
But the cuts appear to be easing. State governments have added 10,000
jobs so far this year. Local governments last month added 2,000 -- a modest
total but only the third increase in two years. "There's only so many teachers you can cut, so many police officers, so
many firemen," says Mark Vitner, senior economist at Wells Fargo Economics. EUROPE'S THREAT HAS SUBSIDED Investors panicked last year over the prospect that Greece and some other European countries would default on their debts, stick banks with huge losses and trigger a global credit crunch. Such fears sent stocks tumbling and helped diminish U.S. consumer confidence in the second half of 2012. But confidence is rebounding. Greece has received a $172 billion bailout, pushing back the threat of a destructive default. And the European Central Bank has made more than $1.3 trillion in low-rate three-year loans to banks since December, making clear it won't let the European banking system fail. U.S. BANKS LENDING MORE TO BUSINESSES After the September 2008 collapse of Lehman Brothers shook the financial system, U.S. banks cut loans to businesses in 2009 and 2010. The credit crunch fed the economy's misery by starving many companies of financing needed to grow and hire. But banks are healthier now. So are the prospects for their business customers. Bank lending to businesses rose nearly 14 percent last year to $1.35 trillion, according to the Federal Deposit Insurance Corp. Loans to small businesses grew at the end of last year for the first time since the FDIC started tracking them nearly two years ago. William Dunkelberg, chief economist of the National Federal of Independent Business, says the outlook for hiring by small businesses offers "a better picture than we have seen for years." Economists are still cautious. A shock like the Japanese quake or further Middle East turmoil could always reverse the gains. Ever-higher oil prices would hurt. And even with the improvements, the recovery from the 2007-2009 remains weaker than past recoveries. But economists say the job market has likely gained enough momentum to avoid a repeat of mid-2011's gut-churning drop. "This year will not be the same," PNC's Hoffman says. "We won't be sitting here in six months saying,
'Uh-oh, it was another false dawn.'"
[Associated
Press;
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