Sept. 5 (Bloomberg) -- When there are more ``home for sale'' than ``help wanted'' signs, the U.S. economy may be mired in recession.

Most gauges are confirming that the housing market has hit the brakes and may be in a tailspin. Existing-home sales dropped a more-than-expected 4 percent in July and the number of unsold houses is the largest since 1993. New-home sales fell 22 percent from the same month last year. And construction spending fell the most in five years.

While higher mortgage rates and affordability concerns have been the bogeymen in the current U.S. housing decline, little attention has been paid to the combined demons of unemployment and adjustable-rate mortgages.

If job growth and consumer spending shrivel because of a meltdown in housing -- an industry that has employed about one in 10 Americans since 2000 -- then the trends could fuel each other and create a maelstrom for the U.S. economy.

There's yet one more gremlin: Not only is unemployment above the national average in the sourest housing markets, there are a lot of ``sub-prime'' adjustable-rate loans that are due to re- adjust and sock homeowners with higher monthly payments.

It's a given that where people are moving in, there's demand for housing, blunting the sting of higher rates.

The Sunbelt states are recording some of the greatest surges in population growth due to the warm weather, low taxes, demographic migration (retirees and baby boomers moving) and new jobs.

According to U.S. Census Bureau population projections, the states with the highest predicted population growth from 2000 to 2030 will be Nevada, Arizona, Florida, Texas and Utah.

Population and Prices

Nevada and Arizona, leaders in home sales and appreciation for the past several years, are forecast to more than double their 2000 population, followed by Florida (80 percent).

The influx of people into the heart of the Sunbelt is propelling home prices. Through the first quarter, the greatest annual home-price gains have been in Arizona (33 percent), Florida (27 percent) and Hawaii (25 percent).

Yet if jobs are leaving, the double whammy of rising financing costs and unemployment can amplify a housing slump.

Generally, communities that are hurt most by job losses tend to be dependent on manufacturing industries.

States suffering most are Michigan, Ohio, Pennsylvania and South Carolina. And there are growing concerns in the Texas population centers, outlying Atlanta, central California, the Denver area and St. Louis, where the U.S. Labor Department reports higher-than-average unemployment.

Jobless Rates

The Detroit-Dearborn area had the highest metropolitan jobless rate at 9.7 percent in July, followed by Salem, Massachusetts, at 7.1 percent.

The Labor Department last month reported an increase in the national unemployment rate -- to 4.8 percent in July from 4.6 percent the previous month. The government's average doesn't include those who have dropped off jobless rolls or have stopped looking for work.

The recent announcement that Ford Motor Co. plans to trim 21 percent of its production will certainly deepen the misery of communities dealing with auto-related job losses.

U.S. manufacturing joblessness has been worsening as some 40,000 plants closed over the past six years, according to the AFL-CIO, the labor confederation. That translates into 1.9 million jobs lost, amounting to 17 percent of the manufacturing workforce -- 48 percent in textiles and 23 percent in machinery alone. Even industries that were thought to be strong are declining. Almost 30 percent of the computer and electronic-parts industry has lost employment.

Trouble in Michigan

As a result, eight of the 20-worst housing markets tracked by the Office of Federal Housing Enterprise Oversight -- the agency that supervises mortgage enterprises Fannie Mae and Freddie Mac -- were in Michigan, a state ravaged by manufacturing job losses, mostly in the auto industry.

Towns once teeming with plant employment are losing people. They include Canton, Ohio; Erie, Pennsylvania; Anderson, Indiana; and Spartanburg, South Carolina.

The rise in short-term mortgage rates will make it even more difficult for homeowners in depressed markets to make payments. Those with adjustable-rate loans -- almost a quarter of all U.S. mortgages -- will face re-adjustments soon. That means higher monthly outlays.

Some 1 million people may lose their homes when 60 percent of adjustable loans ratchet borrowing costs higher by the end of 2006, according to the Association of Community Organizations for Reform Now, a community group that campaigns for low- and moderate-income families.

4.7 Million Homes

Those at greatest risk are typically credit-challenged, carry high-cost, sub-prime adjustable loans and are mostly black or Hispanic. According to the association's study, these borrowers tend to be concentrated in all urban areas in California; Trenton, New Jersey; Bridgeport, Connecticut; and Washington, D.C.

The news isn't all bad if you are looking to buy in this market. Between builders eager to discount and homeowners needing to sell, there may be as many as 4.7 million homes for sale now, according to Friedman, Billings, Ramsey Group Inc., an investment bank based in Arlington, Virginia.

``Since homebuilders have financial incentives to sell new houses in inventory promptly, we expect them to aggressively offer incentives and discounts to homebuyers,'' writes Michael Youngblood, Friedman's managing director of asset-backed securities research. ``Given the average industry profit margin of 25 percent, they have ample latitude to do so.''

While buyers will see some heavy discounting if the current slump is prolonged, sellers should beware. More foreclosures put more homes on the market and sink prices further.

(John F. Wasik, author of ``The Merchant of Power,'' is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: John F. Wasik in Chicago at jwasik@bloomberg.net.

Last Updated: September 5, 2006 00:23 EDT