US housing market 'in freefall'

The slowdown in the US housing market will force businesses to slash 73,000 jobs a month next year and could be more damaging to the world economy than the dotcom crash, warn economists.

"Things do seem to be getting worse very quickly. Freefall is a strong word, but I think it's the right one to use here,' said Paul Ashworth, chief US economist at Capital Economics.

Capital believe that 30% of all the jobs created since the end of the last recession in 2001 (1.4 million) have been in sectors related to the US housing market boom. With the boom over, Capital calculates that 73,000 jobs a month will be lost.

"For a wealth-dependent US economy, the bursting of another major asset bubble is likely to be a very big deal," said Stephen Roach, chief economist at Morgan Stanley. 

"A bursting of the property bubble poses equally serious risks for America's key trading partners and for the rest of an increasingly integrated global economy," he added.

Mr Roach predicts that the property slowdown will take at least 2 percentage points off GDP growth next year, taking the US perilously close to recession.

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