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MARKET COMMENT
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Most, if not nearly all, recruitment companies have reported a slowdown in the employment market and today was no exception. MSB International (LSE: MSB), a specialist in IT and Telecommunications placements, said economic conditions and market uncertainty have shown little sign of improvement. Those tough conditions plunged the company into an interim net loss compared to a small profit last year. Similar tales of woe have been heard from other recruitment outfits that include PSD Group (LSE: PSD) and Robert Walters (LSE: RWA). Half-time earnings at Robert Walters slumped last month amidst a difficult business environment. PSD, which also delivered figures in September, said it did not expect the recruitment services market to improve this year. Given that the labour market remains tight it continues to confound housing pundits who have been predicting a slowdown in house prices. Nothing, it would seem, could be further from the truth. The Nationwide reported today that house prices rose a seasonally adjusted 2.1% from August. This takes the year-on-year increase in September to 22.2%. Whilst this is a smidgen lower than last month's increase of 22.7 % the building society is predicting that house prices could be some 23% higher than a year ago by the year-end. Nationwide also maintains that there remains no compelling evidence that the market is slowing significantly. There is more than just a tacit relationship between house prices and personal income. The strains that currently exist within the labour market should in theory result in a decline in the housing market. Yet despite this well-accepted correlation between house prices and employment the housing market remains inexplicably steadfast. This, however, is unlikely to continue unless, and until, a significant upturn is the labour market is seen. Many existing homeowners have been, thus far, beneficiaries of very low interest rates. They have benefited from some lucrative re-mortgaging deals. Some homeowners have even traded down from more expensive abodes to less pricey dwellings. However, both re-mortgaging and trading down are largely one-off benefits and unlikely to be repeated. This would suggest then a period, in the short-term at least, when house price growth will slow significantly if not decline slightly.