The Unnoticed Recovery

It seems that every day we hear about a stronger economy with real jobs, a recovered housing market and renewed manufacturing strength being just ahead.

We hear about it.  We just don’t see it.

The economy’s been growing for four years now, yet its growth has been so stunted, most of the country still thinks we’re in a recession.  The McClatchy-Marist Poll this week found that 54% of adult Americans think the U.S. in still in a recession, while only 38% think it’s not.

In an economy with a 7.6% unemployment rate (but really more than 14%), any sign of improvement is good news, so we can be thankful that the number of people who think we’re still in a recession is down from 63% in March and 75% in 2011.

Only 29% of those surveyed think their family finances will improve in the coming year, while 19% think they will worsen.  More than half think they will remain the same.

Lee M. Miringoff, Director of The Marist College Institute for Public Opinion, treats the poll results as good news and notes that “President Obama plans to refocus his second term agenda on the economy.”

Well, that should save the day.  Except that a separate poll finds that Americans have little faith in their political leaders.

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House of Cards

The current housing recovery is not a house of brick, but a house of cards.

The cards came tumbling down this week, as the U.S. Commerce Department reported that housing starts in June fell to their lowest level in almost a year.  At June’s pace, new housing starts would total 836,000 for the year, down 9.9% from May’s 928,000 pace.  Multi-family projects plunged 26.2%.

The announcement blunted the stock market rise initiated on Wednesday by Federal Reserve Chairman Ben Bernanke, whose warm-and-fuzzy comments (more fuzzy than warm) can be summarized as “we have no idea when quantitative easing will end and, even if we did, we wouldn’t say.”

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Keep On Easing

Ease on.

That’s the message that Fed Chairman Ben Bernanke delivered this week, causing the bond market to rally, the stock market to hit new highs and the seas to part.

Putting a cherry on top of Bernanke’s comments, the S&P 500 surged 7.5% in just 12 days!

The chairman’s comments came while he was at the National Bureau of Economic Research in Cambridge, Mass., to give a speech about the 100 year history of The Fed.  You can safely bet all of your earthly possessions that media were there not to hear his speech, but to ask questions afterward.  There may have been a quid pro quo, though – if you want to ask a question, you have to sit through my speech.

The gist of Bernanke’s comments can be summarized in three parts:

  • Quantitative easing (QE) will continue, if not forever, as long as Chairman Bernanke is in charge, unless data supports ending it, which will likely never happen.
  • Contrary to the statement above, he didn’t say that tapering won’t begin in September, as many previously speculated.
  • QE and interest rates are two separate things.

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Obamacare’s Economic Impact

What would be a more effective way to increase employment and boost the economy – continue quantitative easing or repeal Obamacare?

The answer is obvious to anyone paying attention.  After more than five years of quantitative easing and nearly $4 trillion in bond buying, the unemployment rate is still 7.6%, which is well above the targeted rate of 6.5%.

But, as we’ve pointed out before, that U-3 unemployment rate is deceiving, as it doesn’t include people who have given up looking for work and it counts part-time employees as if they were fully employed.

As we reported in April, 90 million Americans had given up looking for work, which is why the unemployment rate dropped to 7.6%.

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