While some housing experts argue that homeowners with negative equity are more likely to fall behind on their mortgage payments than those who lose their job, others argue that it’s rising unemployment driving delinquencies in the housing sector and even adding to the woes of the commercial real estate market.

However significant its impact, unemployment will continue to play some role in the future of both the residential and commercial mortgage industries, but the job outlook for 2010 may not be all doom and gloom. One employment tracking firm says it may be hard to see, but the job market will be on the mend in the new year.

After starting the year with the heaviest downsizing in nearly a decade, the number of announced job cuts declined dramatically in the second half of 2009, providing hope for an eventual job-market turnaround. The turnaround should become more evident in 2010, as job creation finally begins to outpace job losses, according to the global outplacement and executive coaching consultancy Challenger, Gray & Christmas, Inc.

The economy is just beginning to pull out of the worst economic downturn in decades. Since the recession began in December 2007, employers have announced nearly 2.5 million job cuts, Challenger, Gray & Christmas reports. The heaviest downsizing occurred between July 2008 and June 2009, with more than 1.6 million job cuts announced. Since July 2009, though, monthly job-cut announcements have declined significantly, and in November, they fell to their lowest monthly total since December 2007.

“The end of the year is typically when we see a surge in layoff activity,” said John A. Challenger, CEO of Challenger, Gray & Christmas. “The fact that job cuts continued to decline in the fourth quarter is a good sign that the job market has truly started the recovery process. Unfortunately, the recovery process is slow, so it could be several months or even years before unemployment returns to pre-recession levels.”

While hiring is expected to accelerate in the new year, unemployment numbers could remain stubbornly high, Challenger says, as millions of Americans who abandoned the job search out of frustration – and, therefore, are not counted among the unemployed – re-enter the labor pool when a stronger job market emerges.

There were approximately 15.4 million unemployed Americans in November, according to the most recent jobless numbers from the government. That’s up from 7.2 million in November 2007, just before the recession began. In addition to the unemployed, there were 6.0 million Americans in November who were not considered part of the labor force because they had not sought employment for at least four weeks.

“Even if we begin to see net payroll gains in the 200,000 to 300,000 range by the end of 2010, it probably will not be enough to offset the influx of job seekers re-entering the labor pool after months of self-imposed exile,” said Challenger. “Needless to say, improvements in the job market may not be that evident in the labor market statistics until 2011 or later.”

According to the latest available data from the Bureau of Labor Statistics, employers hired an average of 4.1 million workers per month in the latter half of 2009. In addition, the agency says that while payrolls are still experiencing net losses, these losses are getting smaller.
“Currently, we are still seeing more separations – both voluntary and involuntary – than new hires. This explains why payrolls are still experiencing net losses every month,” said Challenger. “But those payroll losses are getting smaller by the month and, as the data show, employers are still actively seeking new workers.” According to Challenger, some of the areas that will begin to see renewed job creation in the new year include government, financial services, health care, energy, and information technology.