I'm an educator, and this is the time of year when I also am in report card mode.

So, naturally, I have prepared a report card for the Illawarra economy. Here it is.

Subject: Unemployment

Result: Fall in performance in 2019

According to the latest numbers from the Australian Bureau of Statistics (ABS), there are around 10,000 unemployed people in the Illawarra at the moment, and the average unemployment rate for the year to date has come in at around 5.3 percent.

This represents an increase of about 0.7 percent relative to the same period last year, when it came in at 4.6 percent.

During the first half of 2019 the average unemployment rate was 4.8 percent and roughly the same as the first half of the previous year, but sadly the situation deteriorated in the second half of the year.

The average unemployment rate in the second half of the year came in at a worrying 6.2 percent, which was 1.7 percent higher than over the same period last year.

This acceleration does not bode well for the start of the new year and we can expect a worsening in the unemployment rate at the beginning of 2020.

Subject: Building Approvals

Result: Fall in performance in 2019

According to the latest ABS data, building approvals for the Illawarra region will burst through the $1 billion mark again this year for the third year in a row.

However, while performance is strong in comparison to the last few years, the latest data suggests that building approvals slowed down by almost three percent for the year to date in comparison to the same time last year.

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Further, while building approvals in the first half of the year were up relative to the previous year, they fell dramatically in the second half of the year.

This does not bode well for construction activity and building approvals as we head into the new year.

Building approvals are an important economic indicator because buildings approved for construction today will unfold as construction activity over the next 18-36 months.

The latest data means that construction activity and employment can be expected to subside over the next 18-36 months, though the strong building approvals that preceded it suggests that the decline should not be massive.

Subject: Real Estate Prices

Result: Lower performance in 2019 but signs of improvement

According to the latest numbers for the region from Corelogic, the average price of real estate over the year came in approximately eight percent lower relative to the average over the previous year.

In contrast, in 2018 the average price of real estate over the year was similar to the previous year.

Given that most of the wealth of Australians is tied up in their houses, this means that most of the damage done to the wealth of Illawarra residents from the fall in house prices which commenced in the middle of last year was in fact done in 2019.

This damage accounts in part for the overall deterioration in the local economy noted above.

This is because when people feel less wealthy, they spend less. If they spend less, then demand for goods and services falls and business investment is reduced.

Property prices also have a secondary effect on the economy.

As they fall, property development projects become less attractive and this feeds through into lower building approvals, construction activity and a weaker overall economy.

But there is a little ray of sunshine on the horizon.

If we look at the real estate price data in a slightly different way, then things are set to improve.

While in the first half of this year the price of real estate in the region fell almost seven percent, in the second half of the year it started showing an upward trajectory and improved almost five percent.

This bodes well for the economy at the beginning of next year given the connection between real estate prices and the economy.

This means that we can expect to see a moderation in the downward trajectory of unemployment, building approvals and construction activity in the first half of the year with a possible improvement in the second half.

Overall Performance for the Year: Annus horribilis but prosperity to return next year

In terms of the local economy, we leave a terrible year behind us.

But the good news is that while the first half of the year will probably show further deterioration, the economy should pick up in the second half of the year.

So on that note, in my last article before Christmas, I would like to wish you all a very Merry Christmas and an especially bright and prosperous new year - because the year does indeed promise to be prosperous for Illawarra residents.

Alex Frino is the Deputy Vice-Chancellor (Global Strategy) and a Professor of Economics at the University of Wollongong.