Over the past couple of weeks, economists and headlines have been 'richly' stating that, "The economy is starting to grow again in the current quarter, setting up a long-awaited recovery." US commerce department is stating that in the Q2 that the economy contracted at a 1% rate, compared to the 6.4% rate in the previous quarter. The improvement is claimed to be due to an "11 per cent boost in federal government spending, along with a more modest decline in exports, down 7 per cent, compared with a 30 per cent drop in the first quarter."
The major stock markets experienced gains stemming from the continuing, "Stream of earnings reports that have come in ahead of analysts' estimates." Additionally, the number of US workers filing new claims for state jobless benefits rose last week; however, they remain below peak levels reached in the spring of this year.
Experts are contending that the worst is over for the US housing market too.
By every measure, except foreclosures, the housing market has stabilized and many areas are recovering, according to a spate of data released in the past two weeks. Nationwide, home resales in June are up 9 percent from January, on a seasonally adjusted basis. Sales of new homes have climbed 17 percent during the same period. And construction, while still anemic, has risen almost 20 percent since the beginning of the year.
All this should seem wonderful news to businesses and consumers across America; but it isn't.
The Q2 corporate profits and stock market surge are not based upon consumer demand of products and services, which remains sluggish, but on companies dramatically cutting costs and most notably, payroll cuts. As Robert Reich states, "If a firm cuts its costs enough, it can show a profit even if its sales are still in the basement." In this context, the profits are momentary and not subject to replication.
June jobless rate reached 9.5%, the highest since 1983. Additionally,
the rolls of the long-term unemployed are growing, with 29% of the jobless out of work for more than 26 weeks, the most since records began in 1948. A broader measure of underemployment that includes those who want full- time positions but work part-time has almost doubled over the past two years, to 16.5%." The U.S. consumer "clearly is not going to be the consumption animal that he was for the last 10 or 20 years," Joshua Shapiro, chief U.S. economist at MFR Inc. in New York, said in a July 6 interview with Bloomberg radio.
My post below by Floyd Norris, at the NY Times, clearly shows that suggestions of a housing upswing are in the making are misleading and not necessarily indicative of any long-term positive trends in the market.
The unfortunate reality is that economies and consumers are governed by irrationality, greed, and panic. The psychological determinant is also why governments constantly under-report the severity of an economic crisis. Hence, with that in mind, the announcements made in the past couple of weeks attempt to provide a glimmer of improvement to the public with the overt insinuation that they also represent indices of future prosperity. National Banks, federal governments, and investors eagerly wish that the consumer, instead of hoarding his or her cash, resumes spending; whether it is on homes, cars, or everyday consumables. These entities believe that by prodding "positive thinking" (through fact or fiction) this will instill confidence and public morale, thus leading to increased jobs and an improved economy.
While perceptions may fluctuate, flooding the market with agitprop and attempting to manufacture consent cannot change the harsh reality of this recession. Jobs will continue to be lost, the housing market will not rebound for years, and the real horrors of our leaders economic mismanagement will come to bare next year when the bailout funds disappear and interest rates increase.
No comments:
Post a Comment