Source: NY Times

[For the last 4 years, employment recovery has been weak. [NY Times]](

The usual suspects have been: outsourcing, competition from China, high health care costs and lower work-force participation.

[Daniel Gross](’ article has a different take using a research paper by the National Bureau of Economic Research: [The Economics of Fraudulent Accounting]( “During periods of suspicious accounting (ie Enron, Worldcom, Adelphia, Halliburton, Arthur Anderson, Xerox, etc.) insiders sell their stocks, while misreporting firms hire and invest like the firms whose income they are trying to match. When they are caught, they shed labor and capital and improve their true productivity.” Removing the jobs lost from companies that restated their earnings would account for a large portion of total jobs lost. Enron was the poster-child for this sort of behavior.

So, what? How does this affect real estate?

Well, the Fed watches for employment patterns in its assessment of inflation risks. Inflation influences mortgage rates. For the past several years, productivity gains have been a plausible reason for limited gains in employment. Companies get more productive, then they need less employees. Now that theory is thrown a curve since a significant portion of the unemployment increase was from layoffs of firms that restated their earnings. Maybe things weren’t that bad?

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