Paper Economy
U.S. Treasury Secretary Timothy Geithner speaks during a news conference about the results of the G8 Summit in Toronto, Ontario, June 26. Geithner said that the U.S. is about to pass the peak of short-term stimulus to revive the economy. Some question if the massive stimulus efforts really helped revive the economy. (Jim Bourg/Reuters)
The stimulus hasn't fixed the economy. What will?
It appears we are nearing a critical juncture with respect to the fate of the “recovery.”
Was it really a recovery at all or just the combined effects of financial panic fatigue and a resurgence of speculative animal spirits mixed with a touch of retail therapy fueled by a giant government bamboozle of zero rate money and a trillion or two in stimulus?
Whether it was “cash for clunkers”, the housing tax credit, the massive purchase of mortgage securities, the never ending unemployment compensation, thousands of road projects and other government contracts, etc. etc… the government sought to force money through the system at a frenzied pace that can only be described as nearly comparable to the rate at which the economy collapsed during the worst of 2008.
But what was achieved for all the effort?
There was a notable jump up in stocks of course and a few transitory pops in auto sales and home sales with home prices feeling the effects of the increased buying activity.
The unemployment rate appeared to be in the process of forming a peak and consumer confidence improved resulting in some better than expected retail sales earlier in the year.
Something seems askew… Where is the multiplier?
The government embarks on a crusade of Keynesian monetary and fiscal stimulus the likes of which has never been seen before… a move that is sure to be judged by history to be outright recklessness and all we see is a pop in stocks, some additional auto and home sales, a peak in epically high unemployment and a tick up retail spending.
Worse yet, the stock market has been on the down low seemingly slumping into another “sell into the rally” bear trend since the near simultaneous end of the purchase of mortgage backed securities by the Fed, the end of the housing tax credit and the ramp up in financial regulation (Goldman debacle and Fin-Reg) back in April.
Is that it? Have we reached the end of the “shock and awe” simulative effects?
If so, what's next? What could the government possibly do next to sponsor the economy? Is there the political will to keep sponsoring the economy? Are we headed for another crisis in confidence?
This appears to be a tough situation indeed… one punctuated by the fact that all eyes now turn to China to look for signs of life in the global economy and a lead out of this epic mess.
Have we completely lost our marbles?
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
Continued Unemployment claims since 2008 (Blytic)
A closer look at extended unemployment claims
Thursday's jobless claims report showed a decline to both initial and and continued claims with a subtle flattening continuing to shape up for both series while total continued claims including federal extended benefits appear to be trending down.
Seasonally adjusted “initial” unemployment claims declined by 19,000 to 457,000 claims from last week’s revised 476,000 claims while “continued” claims declined by 45,000 resulting in an “insured” unemployment rate of 3.5%.
Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.
Currently there are some 5.29 million people receiving federal “extended” unemployment benefits.
Taken together with the latest 4.30 million people that are currently counted as receiving traditional continued unemployment benefits, there are 9.60 million people on state and federal unemployment rolls.
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
Mortgage rates continue to drop, but so do home sales
The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for both purchase and refinance applications.
The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.
The latest data is showing that the average rate for a 30 year fixed rate mortgage declined 7 basis points since the last week to 4.75% while the purchase application volume declined 1.2% and the refinance application volume slumped 7.3% over the same period.
It's important to note that with the final expiration of the governments massive housing tax credit subsidy, home purchase activity has been trending down precipitously despite falling interest rates.
The purchase application volume is now near the lowest level seen in well over a decade.
The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since November 2006.
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
Industrial Production May 2010 (Blytic)
Industrial production up in May
Today, the Federal Reserve released their monthly read of industrial production showing continued growth with total industrial production increasing 1.24% from April and 7.62% since May 2009.
While this report appears to argue favorably for a continued recovery, it's important to note that massive government stimulus played an important role in generating this trend.
With the the stimulus now waning, it will be important to watch the trend in industrial production to see how sustained the growth truly is.
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
National Association of Home Builders newly released Housing Market Index. (Blytic)
New home starts slow as tax credit expires
Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing a notable pullback for all measures as home builders downwardly adjusted their outlook in the wake of the home "buyer" tax credit expiration.
It's important to recognize that although each sentiment index continues to show notable year-over-year increases, each still remains near the lowest levels seen in over 20 years.
The new home market will likely not resume any significant form of healthy function until the considerable overhang of inventory is cleared.
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
OECD economic indicators for China (Blytic)
Is China's economic engine sputtering?
Looking at the latest release of the OECD economic indicators for China, it appears that the massive jump in economic activity seen since the panicky period of late 2008 may be drawing to a close.
China’s leading economic indicator has now declined for five consecutive months with the latest April period showing a notable month-to-month slump of 0.19%.
Looking at past recessionary periods, it’s important to note that while China’s economy may be slowing, it will take some time to determine the severity.
We may be seeing the beginnings of an abrupt pullback of equal and opposite force to that of the government sponsored propping applied during 2009 or simply a slowing of a more durable overall recovery as was seen during the periods following the 1990s and early 2000s recessionary periods.
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
Consumer confidence for Greece. (Blytic)
Greece collapsing into recession
Looking at the most recent OECD economic indicators, Greece makes by far the weakest showing in all the Eurozone while further appearing to be clearly quickly collapsing into recession.
Industrial production has fallen off a cliff, consumer confidence has plunged to historic lows, business confidence has made a sudden reversal and the leading index is turning down fast.
Worse yet, Greece may be just the leading edge with Ireland, the U.K., Italy, Spain and Portugal show some initial signs of weakening leading trends.
Is the double-dip here? For Greece the answer appears certain but we will have to wait to see whether elsewhere in Europe and the U.S. eroded similarly.
The pattern is clear though. For those who argued (and still argue) that solving the ills of an epic debt bubble with more debt was sheer folly may soon see their outlook born out.
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
Do UK housing markets foreshadow stronger trend in US?
One of the more interesting and most dramatic features of the housing bubble days was how pervasive and broad the mania was, encompassing a multitude of regional housing markets across the United States and around the globe.
Today, post-housing crash, we are still seeing property markets continuing to move together somewhat as governments around the globe scramble to prop up quickly deflating housing assets.
Comparing the S&P/Case-Shiller (CSI) index to that of the two popular U.K. home prices indices you can see that while the CSI has slowed recently, the two U.K. series (more timely data) is showing a continuation of the expansion that began in early 2009.
Is the U.K. markets foreshadowing a stronger trend in U.S. prices?
The following chart (click for dynamic full-screen version) shows S&P/Case-Shiller Composite-10 series along with the Nationwide and Halifax U.K. series.
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
Mortgage rates continue to drop
The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for both purchase and refinance applications.
The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.
The latest data is showing that the average rate for a 30 year fixed rate mortgage declined 2 basis points since the last week to 4.81% while the purchase application volume declined 5.7% and the refinance application volume declined 12.2% over the same period.
It's important to note that with the final expiration of the governments massive housing tax credit subsidy, home purchase activity is dropping precipitously even with plunging interest rates.
The purchase application volume is now at the lowest level seen in well over a decade.
The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since November 2006.
Add/view comments on this post.
------------------------------
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
Unemployment Duration May 2010 (Blytic)
Length of unemployment reaches Great Depression levels
Be sure to bookmark the "Scary Unemployment Dashboard"... it's live.
Nothing says recovery less than a steadily increasing pool of unemployed workers facing the specter of a quickly increasing average (and median) length stint on unemployment.
In fact, as has been widely reported, the median and average stay on unemployment has simply exploded far surpassing the highest levels seen since records have been regularly kept.
Looking at the charts below (click for super interactive versions) you can see that today’s sorry situation far exceeds even the conditions seen during the double-dip recessionary period of the early 1980s, long considered by economists to be the worst period of unemployment since the Great Depression.
Currently, there are some 6.763 million civilian workers that have been unemployed for 27 weeks or more with the average stay on unemployment standing at a whopping 34.4 weeks and the median stay reaching 23.2 weeks.
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The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
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