Generally, the economic numbers suggest that things are chugging along:
Initial claims for jobless benefits fell to their lowest level in two months last week, but a forward-looking indicator of economic activity suggests cooler growth in the second half of 2007, according to reports released today.
Skip to next paragraph ReutersFirst-time claims for state unemployment benefits fell to 301,000 in the week ended July 14 from an upwardly revised 309,000 claims the prior week, the Labor Department said. Economists had expected them to rise slightly.
It was the second consecutive weekly decline and took initial claims to their lowest level since mid-May.
I am wondering if 2008 will be yet another election with the economy taking the backseat. Iraq really is overshadowing everything else at the moment, so it is hard to tell. This most likely should be looked at seriously, though.
Jack Mehoffer, Springfield
If I’m not mistaken, the economy is a mixed bag depending on who you talk to. Stock market & unemployment? Good. Wages and standard of living (excluding top earners)? Not so good. Is this true?
ThymeZone
What, we’re suggesting that a snowboarding dollar and massive credit extended to the US by China and other countries who have an interest in keeping us buying their melamine-spiked food products …. are keeping us in a bubble of denial about our declining economic health?
Why do you hate America, John? Why?
Dreggas
John,
Also in play is the housing forecast. The two big Hedge funds managed by Bears & Stearn that rely on home loans and mortgages have tanked and are “worthless”. Further more and more people are losing their homes due to ARM resets and income not keeping up with it. Mortgage outfits are still tanking and housing prices are falling (especially here in So Cal). In fact they may fall as low as they were prior to the bubble so people who bought now are losing money on their homes.
It’s not pretty.
Dreggas
In a nutshell yes. The stock market and dow paint a rosy picture, underneath it all when you get to the average person there are more thorns than roses.
Zifnab
But people typically look at the war and the economy as linked. And when you’re spending $10 billion a month, can you blame them? What economic problem in America couldn’t be solved (or at least, patched up) with $10 billion a month?
If I were a homeowner looking for an ARM bail-out or an investor hoping for government dollars to spike my marketplace or an educator looking for a raise or a small town looking for money to develop the infrastructure, even a rich old bastard paying his taxes, how could I not look at $10 billion a month and think “That money could be going to me.”
demimondian
It really depends on when the housing pinch starts being felt. I’m not at all sanguine about how far the mortgage crunch is going to spread. Even in the best case, in which sub-prime just gets harder to get, the downward pressure on house prices is going to hurt, both directly, as home equity loans dry up, and indirectly, as home loans become unservicable.
Dreggas
Subprime was the start, now the crunch is spreading to Alt-A lending, was just reading that another local Alt-A lender declared Chapter 7. Other companies are looking to liquidate their REO’s but are having to do so at a big loss because of the market downturn.
Buyers are drying up due to prices and a lot of homes are now on the market and many were built in anticipation of having buyers. It’s not a seller’s market anymore and people are hurting because of it.
jg
Well the economy is going gangbusters for those who are rich and since the media stars are rich they will continue to tell us the economy is going great.
And I believe them.
jenniebee
The resonating mantra is going to be:
What we spent on Iraq, we could have spent on Health Care.
conumbdrum
I don’t know a single person who is doing better financially than they were, say, eight years ago. (Even my Republican brother is taking home substantially, though he still, in the face of all logic, manages to blame that on the Dems.) I saw a recent study (sorry, no link) claiming that, in order to be as well off as they were in those happy pre-Bush days, an average Joe or Jane of today would have to work six more weeks per year.
I’d say Dreggas nailed it. Wall Street and the fat cats are doing swell… the Joes and Janes, not so much. And the media ain’t listening to the latter.
Tax Analyst
The Real Estate market is stumbling & tumbling badly…much worse than the “statistics”, at least here in SoCal, because they are being skewed by the extreme high-end market sales, which are still going along just fine…because rich people are doing just fine and dandy in this economy…and mega-millionaires really aren’t sweating $3.50/gallon gasoline too much. Joe Cube-setter is currently sucking a lot of hind tit, however, and he’s starting to notice it. The Business section tells him the “Cost of Living, EXCLUDING ENERGY & HOUSING, rose an imperceptable 0.1% last month…” blah, blah, blah, and when Mr. Cube-Setter reads that his non-sophisticated little brain goes…”Hmmm…how do I get to exclude those housing and energy costs from MY budget and not get tossed out on the street and have to walk to work?” and he starts to get kinda annoyed – and worried, too…especially if he’s already tapped most of his home equity over the boom years by constantly Re-Financing. “But-but-but-but the Mortgage Guy said Real Estate values NEVER go down and I would always be able to get a new and better Re-fi later on…” Guess he was lyin’ to ya’, huh? As much as I can enjoy a little Schadenfreude over someone who kept bragging about how cool it was to tap into that easy & effortlessly acquired equity and buy all the neat shit his little heart desired while smirking at my 9-year old Ford I really don’t want to see scores of people lose their homes at the same time in more of less the same areas. It’s really not a healthy thing, community-wise.
That said, I do not want a Congressional bail-out in this. Lender’s can discount the principal or make allowances or adjustments if they so choose and avoid having to force homeowner defaults. Or they can plow ahead and have a nice fat inventory of vacant homes sitting around deteriorating and or being vandalized on a daily basis. Responsible lender’s are likely to do the former and the others will disappear back into the woodwork until another bubble starts to brew.
grumpy realist
Heh. Will have to see what the real estate prices do here in Chicago. Am just about to close on a condo, picked mainly because the bloody prices in my rental are going up (due to new improved interiors) and I looked at it and said “fuck this, I could get a mortgage and pay less.” Decided on the place due to location, location, location….walking distance to everything and I doubt the area is going to change that much over the years since we’re smack in the tourist section, and sure as locusts, they’re back year after year. Plus allocated parking, which in this location is worth the area in gold.
We’re seeing a bit of softening of the market–at least not the hard chargin’ ahead in prices we used to see. Some innocents have just tried to flip a new two-bedroom for $385K and we’re all laughing at them. Try $350K, dudes, and maybe you might have a chance.
grumpy realist
Of course, I’d like to add we’ve got sufficient Victorians going at $1M or more in the area…and people buying them, which really makes me cross my eyes. Hey people, for what you’re paying in property tax I could pay my mortgage.
I doubt we’re going to see the incredible rise in real estate prices ever repeated, so please don’t make it all that big a part of your portfolio, okay?
I’ve also lived in Japan through the entire bubble collapse period, so don’t tell me drops of 40% can’t occur….
Dreggas
double this (either number) and you have the going price for a basic ranch style here in So Cal.
Dreggas
Tax Analyst,
I used to develop software for the Mortgage industry, I saw this coming a mile away with the whole in vogue idea of Option ARM’s and such. It’s going to get even worse especially now that this is pouring over into the Alt-A market which was also booming thanks to the bubble.
The only good news (as much as I hate profiting off of others misery) is that by this time next year I’ll be able to afford a house even here in OC.
sab
I heard on MSNBC this morning that our economy is growing at a blistering rate of 2%. What a relief.
RSA
My reaction is largely personal; for example, I just spent a couple of weeks in the UK, where all the prices seem to be just about where they are in the US, until you realize that (a) they’re in pounds and (b) a pound is worth two dollars. What struck me most about the article, though, is this:
The Canadian dollar hasn’t been worth more than a US dollar since the mid-70s, and for my entire adult life it’s been worth considerably less. Now we’re approaching parity. With Canada. The mind reels, eh?
grumpy realist
I was in London 2001-2003 and my jaw was dropping at the prices that were getting charged. Got to see the end of THAT property bubble as well.
To give you an idea, my rent was twice that what I had been previously charged….in Tokyo. For a not too much bigger flat.
Krista
Oh my goodness. How can anybody making an average wage afford that without selling their organs?
I feel much better about living in the sticks now, needless to say.
Tax Analyst
Well, Krista, what a lot of folks did (but not me)was move to our equivalent of “the sticks” (Inland Empire, Lancaster or Santa Clarita areas) where prices were deemed more “affordable” (but only so if you got a really low interest rate – which for many folks were those sub-prime types that were going to automatically balloon in 5 years or other loan-gimmick products). Unfortunately that particular house of economic cards depends on affordable transit to their jobs…still in the L.A. Metro area or other places 50 or more miles away from these “affordable areas”…and since most of these folks need automotive vehicles to get to work the $3.50/gallon gasoline really screws them over. Me? I rent in Culver City…it’s a very small unit which I intentionally took to try and curb my “pack rat” impulses (only partly successful in that regard)…pay a little over $750/month.
Tax Analyst
I should add that the rise in interest rates and drop in home equity totally screws over a rather large swatch of these folks. When Home equity is lower than the outstanding principal balance you have an uncomfortable situation. I believe the technical reference term is “You’re Fucked”…
RSA
That’s pretty good. I rented in Venice for a year, in 2005: $1800/month for a studio apartment.