 Although consumer confidence (Conference Board Index) was reported up for the second consecutive month in December, notes Bloomberg, there are signs that government’s boost to the economy is starting to wane.
The federal government has sought to address the housing crisis by taking actions to hold down mortgage rates, providing incentives for lenders to negotiate new mortgage terms with homeowners, and extending and expanding a federal tax credit for home purchases.
But, now the indications are:
• Interest rates may soon rise (see Wall Street Journal article);
• About two-thirds of homeowners with renegotiated mortgage terms still are falling delinquent (featured Bloomberg article); and
• There has been criticism that the homebuyer’s tax credit didn’t genuinely attract that many new buyers and, instead, served as a subsidy for people who didn’t really need it (see AOH, Dec. 31, 2009, “Is the Mortgage Mess Getting Bigger,” specifically, the essay by Doug Bandow).
• In addition, as Bloomberg notes, despite the extension and expansion of the tax credit, the percentage of Americans with intentions to buy a home is declining.
The relative success or failure of these government efforts is debatable, of course.
But, the salient point for the American public may be that government intervention is not the same as genuine recovery. And, by many accounts, genuine recovery is still quite tenuous and, in fact, may or may not be happening at all.
Unemployment: Worse than 10%, Hiring Not Up
Even if unemployment begins to moderate and winds up averaging 10 percent in 2010, that is still the highest rate of joblessness recorded in government records since 1948, Bloomberg notes.
And, as AnalysisOnline pointed out on December 14, 2009 (“Job Growth: Both Sides of the Equation”), the 10 percent figure can be relatively meaningless when the broader rate of discouraged job-seekers and underemployed workers is 17.2 percent and rising; and when 14 states have rates of joblessness far in excess of the national average of 10 percent.
Although layoffs show signs of having moderated, that doesn’t tell the full picture. According to the Economic Policy Institute, “for the labor market to begin recovery from the dramatic losses of the last two years, two things must happen: Layoffs must decline, and hiring must pick up.”
Layoffs have improved, but don’t represent the full sweep of “separations” or employees leaving employment, which also includes retirement, disability, death, and voluntary departures.
Hiring, as seen in this EPI graph, has not turned the corner and remains stagnant.
Congress is scheduled to tackle President Obama’s job-creation initiative in February, but there is mounting concern that the provisions contained in the legislation spend the bulk of the money on government safety-net aid, but won’t actually create new jobs (see ABC News report).
Trying to Fuel Optimism
Government reports seek to highlight every sign of perceived economic improvement, but are frequently revised downward in subsequent months when more precise data becomes available (see TradingEconomics on GDP andBureau of Economic Analysis news release). To achieve genuine economic growth, the United States, the world’s largest economy, must first overcome the very serious contractions in recent quarters, as shown here.
And, as theTradingEconomics article notes, the growth that has occurred has been substantially “boosted by government stimulus programs, including the popular cash for clunkers and the tax credit for first-time homebuyers” and there are serious questions whether economic growth can be sustained when federal cash infusions stop, it says.
In addition to the Conference Board’s Consumer Confidence Index (for which historical data is made available only to paid subscribers), other measures of consumer attitudes are provided by Rasmussen Reports Consumer Index and a recent survey by the Pew Research Center for the People and the Press. They both show some improvement in the near-term, but still far below historical highs.
The Rasmussen Consumer Index established a baseline of 100.0 points in October 2001. Currently, the economic confidence of consumers stands at 77.4, up a point from the previous week and up five points from the previous month. The historical high was 127.0 in 2004. Still, today, 52 percent of Americans rate the U.S. economy as poor, compared to 50 percent a year ago. Twelve percent say it’s good or excellent, compared to eight percent a year ago.
The comparable investors index is up 21 points from a year ago to 84.1, but down five points from last week.
If consumers are beginning to look out over 2010 somewhat more optimistically, it could be because they see conditions getting better or it could be they are seeking some relief from a miserable, just-completed decade.
The Pew Research Center for the People and the Press, in a survey released December 21, 2009, determined that Americans regarded the period 2000-2009 as the worst decade in 50 years.
The people who held negative views of the 2000s outnumbered those with positive assessments by about 2-to-1. The 1980s were the most popular with almost five times as many Americans holding positive views as negative ones. In all of the last five decades – except the 2000s – Americans were more positive than negative in their outlook.
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