US economy sat on a wall, US economy had a great fall
Since it fell, the economy has been shoddily glued back together. But it still has more cracks than Humpty Dumpty.
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Meanwhile, incomes aren’t inflating at all, which means that the Smiths and Joneses are feeling the effects of inflation immediately and acutely. In February, the same month that consumer prices jumped 0.5%, average weekly wage-based earnings did not increase at all. In other words, as Rosenberg explains, “[Inflation-adjusted] work-related income was crushed 0.5% and has now deflated…in five of the past six months, during which it has contracted at a 2.3% annual rate…Skip to next paragraph
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“There is a well-defined historical inverse correlation between household inflation expectations and the direction of consumer confidence,” Rosenberg continues. “So it wasn’t at all a mere coincidence that in the same month that inflation expectations shot up to near-two-year highs, consumer confidence, especially for the low-income strata, fell back to the depressionary levels posted back in the 2009 winter of discontent. While the University of Michigan consumer sentiment survey for March revealed a steep slide to 68.2 from 77.5 in February – a five-month low – the sub-index for low-income households sank from 71.1 to 60.7. The last time it was this low was in March 2009 when the recession was at its worst.
“Finally,” Rosenberg winds up, “it is hard to believe, looking at the housing data and understanding the sector’s importance in driving growth for the entire economy given all the huge multiplier effects, that we can end up having much of a recovery during periods where there is scant government stimulus. Housing starts collapsed at an astounding 95% annual rate in February (yes, you read that correctly) to stand at 479k units at an annual rate, the second lowest on record and the lowest since the economy was plumbing the depths in April 2009. Normally, housing starts are up 34% from the time the recession ends to the 20th month of the expansion (where we are now) – not down 18%, as is the case currently. In fact, never before have housing starts been negative at this point into a recovery, let alone being down a huge 18% since the recession ended…The fact that building permits, which lead starts, plunged 8.2% after that dramatic 10.2% falloff in January suggests that a turnaround is not yet in sight, sadly enough…”
The news is not all bad, of course. But it is bad enough to give a stock market bull reason for pause…and it is certainly bad enough to give a dollar-holder reason to own fewer dollars.
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