GlobeSt.com: Anything worrisome on the employment front generally?

DeKaser: At the moment, employment trends are extremely favorable, which means that we're adding jobs at a pace that over the longer run is not sustainable. But that's not a bad thing. When you come out of recessions, there's typically a lot of slack in the labor market and unemployment is unusually high, so it makes sense to grow jobs at an accelerated pace to absorb all of that unemployment. Right now we have an economy that's fully employed. Officially, as of March, the jobless rate is 4.7%, and that's probably a bit tighter than can be sustained, and yet we're still adding jobs at this above-trend pace. The monthly employment report, which is pretty closely followed by the financial markets, has been showing job gains roughly in the vicinity of 200,000 since the hurricane episodes of last fall. Our economy is capable only of delivering somewhere in the vicinity of 150,000.

GlobeSt.com: Is this a great buildup to an eventual round of layoffs?

DeKaser: No, I don't think so. More likely, and what the Federal Reserve is targeting, is a situation where we simply have to reduce the pace of net job creation to that which is slightly below these longer-term trends. In other words, if we want to see the unemployment rate stabilize in the vicinity of 5%, we're going to have to see employment growth that's in line with the underlying demographic growth of our labor force, which is in the vicinity of 1.5%.

GlobeSt.com: How does all of this relate to construction jobs?

DeKaser: Construction, which is the biggest part of real estate-related employment, has been growing very strongly of late, in fact, it's been one of the lead sectors in terms of job creation over the most recent four-year period. This in turn is a reflection of what's been going on in the housing market with its successively higher levels of building activity year after year. However, it looks like this is due for a change, since the housing market has already experienced a significant decline in demand that's not yet manifested in a decline of construction activity. It certainly has to very soon. We're starting to pile up unwanted inventories that are surely a signal to developers that they need to cut back. So residential construction-related employment looks like it is sure to decline as we get into 2007, and much the same can be said for much of the mortgage-related activity. In fact, we've been reducing our staff in that regard for months now, and it's definitely a broader trend than just us.

GlobeSt.com: How does the single-family slowdown impact the commercial side of the market?

DeKaser: Fortunately, the commercial sector has been in perfect asynchronization with private housing. The 2001-2005 period was characterized by rising levels of residential building. It coincided with what initially was a decline in commercial construction around 2001, 2002. Then, from 2003 to 2005, there were extremely modest gains in commercial construction, in the 1%-to-2% range. During that time of strong housing-construction employment, we saw virtually no gains in commercial-construction employment, but that's changing now, and as the housing market cools and ultimately declines, we'll see a resurgence in commercial-construction employment. It'll provide an important offset to housing.

GlobeSt.com: Where do you stand on the bubble question?

DeKaser: I never use the word bubble, and I try to avoid discussing the housing market as a singular entity. There are many markets with many characteristics. Is there a bubble? My flat answer is that there is not. Are there areas where prices are inconsistent with historic norms? Yes. We've done a lot of research on this, which concludes by saying that about 40% of the US single-family market is extremely overvalued to degrees that would be associated with risk.

GlobeSt.com: Sounds like a lot.

DeKaser: It is a lot, although that's by dollar value. If you look at units it's closer to 20%. But it's still a big chunk of the market. In the past, when we've seen markets get overvalued and then correct through falling prices, it almost always occurred in the context of a declining economy. I'm broadly optimistic that that's not what we're looking at in 2006 or 2007. So as long as we have a healthy labor market with rising employment levels we should be able to get through this moment of overvaluation without any kind of broadly based incidents of price correction.