By Fred Arnold
Ben Bernake and the rest of the Fed Open Market Committee members, have finally admitted that the economy is not doing well and that they have concerns about future growth. The FOMC acknowledged that the economy is slowing down and have even gone as far as to lower the projections for future economic growth. (Why is it that they take so much longer to acknowledge reality than everyone else?) The bright side of their report released this week is that the projections for economic growth, as much as they have been lowered, are still in positive territory.
It is clear that the economy is struggling to gain traction towards a real recovery and more and more economists and experts are beginning to recognize that the real possibility of a long period of minimal economic growth may be in our future. There appear to be just too many forces right now working against a sustained strong recovery from both within the U.S. and abroad.
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The job market continues to struggle. Once again First Time Jobless Claims jumped higher and they continue to remain well above 400,000. This past week there was an unexpected surge in claims up to 429,000 which has many experts scratching their heads as to what has to happen for it to reverse direction and drop below 400,000.
The economy, although not great, is far more stable and the banking and corporate crisis has passed. Since housing is now the single biggest drag on the economy, doing something to stimulate housing could very well move the economy forward not only temporarily, but create positive momentum for the long term. (Please understand, I am not blind to the fact that government borrowing and spending must end. However I do know that until housing turns around, the economy won’t recover and the housing sector needs more help because it can’t seem to do it on its own)
This past week we had a mixed bag of housing data. Existing Home Sales declined 3.8% from the prior month and are 15.3% lower than the same time last year. New Home Sales dropped 2.1% which continues to demonstrate that builders will struggle until the existing inventory of housing drops significantly.
Positive housing news is that foreclosures are declining. It appears that the drop in foreclosures may be genuine and not just because banks have slowed down the foreclosure process. Additionally, the National Association of Realtors leaked out that next week’s report on Pending Home Sales may actually show a nice increase.
Economic Reports on tap for this week:
o Tuesday June 28th – Consumer Confidence
o Wednesday June 29th – Pending Home Sales & MBA Mortgage Apps.
o Thursday June 30th – First Time Jobless Claims
o Friday July 1st – ISM Manufacturing Index
Have a great week.
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