By Fred Arnold

As I go around town and travel throughout the week I get a lot of, “I love the newsletter but was bummed after I read it” or “so our economy is not recovering?” I love this country and believe strongly in our fundamental values as a Nation. Our people are resilient, our diverse culture is unique and the Freedoms we enjoy are what make us great as a Nation! I also firmly believe until we fix our broken system of how elected official are more concerned about the next election instead of fixing Social Security, having a sound enforceable Immigration policy (whatever that looks like), a practical energy policy, and stop wasting our children’s financial future in reckless spending among other things we cannot soundly recover and be strong as a Nation once we emerge from this great recession!

It doesn’t take a Democrat, Republican, Independent or any other political party you believe in to understand sound fundamental principals we need to work on as a Nation. The problem is most elected officials will not bring these subjects up because they don’t want to lose votes of one group or another so they don’t tackle critical issues that are vital to our country! If we can tackle these challenges head on we can create certainty in our future and bring prosperity back to our country! See some ideas I have presented below!

Now for my weekly report.

For nine straight weeks we have seen First Time Jobless Claims in the 420,000 to 430,000 range.  This week they dropped to 414,000 which represents a 16,000 drop from the prior week.  Any drop is good, however 414,000 claims is still very high.  To prove my point about what we can get used to, Bloomberg.com reported that the drop of 16,000 is, and I quote, “very good news for the economy”.  (Since when is 414,000 people losing their job considered “very good news”?) (How about offering Employers an incentive to hire unemployed workers. Have the unemployed worker collect their unemployment while working for the new employer for three months while the employee is getting training. The employer matches the unemployment checks thus doubling the amount the unemployed gets and the unemployed worker also gets trained in a new field! The employer can then hire the unemployed worker after the three month training period thus taking an unemployed off the government payroll. Just a idea!)

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Housing is showing a little sign of life.  Housing starts for new single family home construction rose 3.7% in May.  This increase is a reversal from April’s 3.3% decline.  Most experts believe the increase is related to seasonal building as well as that some parts of the county have been facing abnormally harsh weather which delayed some builders from starting construction in the prior months.  Housing permits also increased 8.7% in May which may lead to even more new construction later in the year.  Future housing demand will determine if builders ultimately break ground on their permits.

Foreclosures have declined for the 8^th straight month.  In May they were down 33% from a year ago.  Additionally the number of homes repossessed by banks declined 29% from a year ago as well. (An idea, instead of making banks fund loan modifications at 2%, offer an option where a homeowner, if they short sell the properly in great condition the bank can offer a $5,000 incentive to the borrower that’s in trouble. I know it’s not politically correct but we are modifying a lot of loans where the homeowner cannot afford the modified payment or just wants a new beginning. Get that home sold to someone that can afford the payment, love and fix up the home thus putting money into the economy, Just a idea?)

Most of the other economic reports don’t solidify that the economy is really going in one direction or the other.  You may have been hearing in the media that there are many signs that the economy is once again slowing down.  However, when you look into the actual reports, it appears that the economy is more like moving two steps forward and then two steps back.

Industrial production and manufacturing both showed modest increases in May.  Although the increases did not meet economist expectations, overall manufacturing is fairly healthy. The main reason for the lower than expected production numbers is due to the March earthquake in Japan.  Because of the damage to Japan’s infrastructure, there continues to be a shortage of available automotive parts which has a direct impact on overall manufacturing.

Inflation on both the wholesale and retail levels remains very much in control.  In recent months we were seeing that prices have been rising faster than we would have liked.  Volatile fuel and energy prices contributed to the increases however we have seen recently that energy prices have declined somewhat. (If we create a sensible 30 Year National Energy Policy that includes both clean energy along with drilling for oil all energy prices would drop overnight!)

Economic Reports on tap for next week:

o    Tuesday June 21^st – Existing Home Sales

o    Wednesday June 22^nd – FHFA House Price Index, FOMC Meeting Announcement & MBA Mortgage Apps.

o    Thursday June 23^rd – First Time Jobless Claims & New Home Sales

o    Friday June 24^th – Durable Goods Orders and National GDP

Have a great weekend.

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