For analysts who follow the housing market closely, today's report for 20 major cities was no surprise but rather a confirmation of what they already knew: Housing is in a double-dip. That means the construction industry will remain deep in the doldrums, a major drag on the overall economy, which for a long time has been driven by housing and consumer spending:
Data through March 2011, released today by Standard & Poor’s for its
S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.
Or, stated another way, housing prices have fallen past their previous low point for the Great Recession. New lows were set in Atlanta; Charlotte, N.C.; Chicago; Cleveland; Detroit; Las Vegas; Miami; Minneapolis; New York; Phoenix; Portland, Ore.; and Tampa. There is wide regional variation, but nationwide the report is just one more indication that the economic recovery that officially began in June 2010 is, to put it charitably, not up to snuff.
As shown by another report released today, consumers are feeling it. As measured by the Conference Board, their confidence dropped to a six-month low in May. That confidence level is reflected by weak growth in consumer spending. And that is, in part at least, due to lack of growth in labor compensation. Manufacturing growth, which had been a bright spot in the economy also is dropping off. A manufacturing report scheduled for release Wednesday will show just how far.
And while there is plenty of talk about the bottom of the housing market being reached, it hasn't happened yet, and a number of analysts say it won't for a while. All the elements that affected housing a year ago remain in place: Credit is tight, demand is low with more people being comfortable renting, housing inventory including the so-called "shadow inventory" of speculators remains high (putting even more downward pressure on prices) and foreclosures are well above historic averages. All this contributes to fewer sales. Which contributes to less new construction. Which contributes to fewer jobs.
And that points us to the most ominous aspect of the slowdown—the so-called recovery never picked up enough steam to put more than a dent in unemployment and now it's weakening still more. Among the 14 million Americans officially out of work are 5.8 million who have been jobless for six months or more. And that 14 million is at least double when taking into account workers who are underemployed or no longer counted as being part of the labor force even though, by any realistic measure, they are.
The slowdown was punctuated last week by the Labor Department's release of its second estimate of the annualized growth in gross domestic product for the first quarter, a pallid 1.8 percent. Earlier predictions that the economy would grow as much as 4 percent or even higher for all of 2011 are being replaced by predictions that it will only grow 3 percent. Several top analysts have pulled back even further than that, with economists at Bank of America Merrill Lynch having cut their prediction from 2.8 percent to a meager 2 percent.
Even optimists are suggesting we may be in for a long period of below-average growth and high unemployment. We're due for another monthly jobs report Friday.
While jobs, jobs, jobs still get mentioned by our leaders as we enter the outskirts of the 2012 election season, deficit, deficit, deficit is the chief focus in Washington, including the focus of far too many Democrats.
Paul Krugman, who has warned repeatedly about the dangers of a failure to deal vigorously with lackluster employment growth had more to say this week:
Unemployment is a terrible scourge across much of the Western world. …
Instead of a determination to do something about the ongoing suffering and economic waste, one sees a proliferation of excuses for inaction, garbed in the language of wisdom and responsibility. …
In pointing out that we could be doing much more about unemployment, I recognize, of course, the political obstacles to actually pursuing any of the policies that might work. In the United States, in particular, any effort to tackle unemployment will run into a stone wall of Republican opposition. Yet that’s not a reason to stop talking about the issue.
And it's no reason to sugarcoat the situation as some happy talkers have been doing now for quite some time. In spite of Republican stubbornness, and far too many Democratic laggards, the administration ought to present a plan that builds on its modest push for a clean-green infrastructure. No, it won't get through the House of Representatives. But it speaks to a future world better than the one we now live in, something President Obama has been eloquent about in many arenas. He can even take a poke at GOP obstacles in this regard by bringing up patriotism. The Center for American Progress has some good ideas about this in its new A Uniquely American Strategy for Industrial Renewal.
Clean-green is where a major portion of future job growth will be. It's what we would need to do and should do as a nation even if jobs were not in short supply. And it's the proper answer to the appalling no-can-do attitude of the excuse-makers, the abdicators and the bought-and-paid-for promoters of a path to prosperity for the few who are already prosperous.
