US job losses down but housing remains a risk

Wednesday's economic reports show the US economy on a gradual path to recovery. Reuters reports:

According to the ADP Employer Services report on Wednesday, U.S. private employers shed 169,000 jobs in November, down from 195,000 in October. Despite the decline in job losses, the November figure topped economists' median estimate for a loss of 155,000 jobs, according to a Reuters poll...

In another sign that corporate work force cuts are tapering off, the number of planned layoffs at U.S. firms shrank in November to the lowest level in nearly two years, according to a report by global outplacement consultants Challenger, Gray & Christmas Inc.

Employers announced 50,349 planned job cuts in November, the fewest number of planned job cuts since 44,416 in December 2007, according to the report...

The Federal Reserve's overview of the economy on Wednesday was largely positive, but gave it little reason to move off from its ultra-low interest rates designed to stimulate growth.

The Fed, in its Beige Book report, said eight of its 12 districts reported some pick-up in economic activity since the last report on October 21.

The remaining four -- Philadelphia, Cleveland, Richmond and Atlanta -- reported conditions little changed or mixed, the Fed said.

However, a renewed decline in housing remains a threat to the US economy. From Reuters:

The meltdown of the U.S. housing market is not over yet, and home prices will soon start trekking downward again as a flood of foreclosures looms, a well-known economist said on Wednesday.

Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, said in an interview with Reuters home prices will resume their decline by early next year as foreclosure sales pick up again.

"The housing crash is not over," he said.

A more sanguine view on housing risks is provided by Morgan Stanley's Richard Berner.

Despite recent improvements in housing demand, construction and home prices, housing risks are turning negative immediately ahead. A ‘payback' from the end of the first-time homebuyer tax credit likely will be the main catalyst, and additional negatives involve the interplay among less-favorable demographics, looming foreclosures and rising joblessness. Yet we strongly believe that renewed housing recovery is coming, courtesy of improved affordability, some easing in credit availability, a renewed tax credit and a return to positive employment gains. The upshot: Weakness in demand, activity and prices is likely through year-end, but we still expect modest improvement in 2010 and beyond: A 10% rise in demand and housing activity is still the most likely outcome next year.