"It was the best of times, it was the worst of times;..."

"It was the best of times, it was the worst of times;......." at least according to Charles Dickens in A Tale of Two Cities.  I was thinking about that quote as I reviewed some of the recent economic news but realized that it didn't quite fit the circumstances.  Maybe I should paraphrase it to, "It was the worst of times, it was the not-quite-as-bad-as-it-might-be of times."

The bad?  Yesterday's release of the January 2011 S&P/Case Shiller Home Price Indices (http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----) showed another decline in the values of existing homes.  To be more precise, the twenty-city Composite Index posted its 57th consecutive monthly decline, showing a drop of 31% from its May 2006 peak.  Not all markets within the composite shared equally in the fall, as Las Vegas and Phoenix occupied the cellar at -58% and -55%, respectively.  While Chicago posted a decline approximately equal to the Composite at -30%, Denver and Dallas values have fallen the least at 10% and 7%, respectively.

All of this data is relative, given that not all of the markets hit their peak values at the same time and across the country not all home owners bought at the peak.  Closer to home, we bought our house in March 2005, and its value climbed fairly steadily for a couple of years.  Although the greater Charlotte Metropolitan Area has values down 16%, which isn't bad compared to the national average, our home is only down about 2% from the purchase price.

This continuing slide of home values means more pressure on an already over-burdened real estate market.  The continuing fall in values means more homeowners are under water on their mortgages and lower values continue to hold down the number of home sales in a market where there is already too much inventory.

When you're in a hole and want to get out, you first have to stop digging.  So far, that hasn't happened.

The good?  This morning ADP, the payroll processing giant, reported some positive employment information.  According to The Wall Street Journal (http://online.wsj.com/article/SB10001424052748703806304576232393531640116.html) ADP said the US economy added 201,000 private-sector jobs, with the average monthly gain over the past four months of 211,000.

This would be much better news if the unemployment rate wasn't expected to remain extremely high at 8.9%.  To move that 8.9% number, which represents about 15 million people out of work, down to about 4.5% over the next three years, the economy will need to create new jobs at a rate that's at least twice as fast as it has during the last four months.  Job growth at 200,000 per month is good enough to stop digging our hole any deeper but not good enough to bring the American employment picture back to a more normal view.

When larger numbers of people go back to work, they'll buy more goods and services.  Producing, moving and selling those goods and services will put even more people to work and larger numbers of them will buy some of those houses that have been sitting in inventory, losing value.  The taxes all of these new workers pay will help put our local governments, including school districts, back in the black, too.

In my opinion, private-sector job creation is the number one challenge facing us today.  Everything else is a distraction from that mission that we cannot afford.