The media and financial talking heads continue to credit housing for the recovering economy. As reported here last week the housing market despite improving remains tepid with existing home sales running at 80% of healthy nearly four years after the end of the Great Recession.
New construction languishes at 40% of healthy. Soon you will be treated to reports that construction is picking up in the spring. That’s like saying temperatures will rise in the spring.
What is the key to a real recovery? Jobs.
What will lead to job growth? A confident consumer with disposable income. The wealth effect of having that extra jingle in the pocket makes for a consumer more apt to spend. You know the story from there. People spend creating the need to produce more which results in the producers hiring more people to meet the demand.
It was reported on March 1 that personal incomes declined the most in 20 years by 3.6% while the savings rate fell from 6.4% to 2.4% the lowest since 2007. Then we were treated to the highest gas prices on record to begin March. Does this indicate consumers are feeling a lot of extra jingle in their pockets? Does this paint a picture that leads to rising confidence?
From Gallup this week we have learned: Consumers’ outlook for the labor market was more positive. Those anticipating more jobs in the months ahead improved to 16.7 percent from 14.4 percent, while those expecting fewer jobs decreased to 21.5 percent from 26.7 percent. The proportion of consumers expecting their incomes to increase rose to 15.7 percent from 13.5 percent, while those anticipating a decrease fell to 19.6 percent from 23.3 percent.
Significantly more people remain pessimistic about the outlook for more jobs than are optimistic. It’s a stampede of confidence, one in six believes there will be more jobs! One in seven look for rising incomes! Is this a signal of rising confidence?
After six trillion dollars in deficit spending the workforce participation rate remains at early 1980’s levels at 63.9. It has become a broken record the past three years, 22 to 23 million unemployed or underemployed with over 8 million giving up and no longer counted. Does this inspire confidence?
During troubled times in our nation’s history what inspired confidence? Strong leadership sharing with the people their plans and why they will work. Compare FDR and his fireside chats, Reagan and his shining city on the hill with Carter telling you to put on a sweater and Obama doom if government can’t have an unlimited checkbook.
Obama’s apocalyptic rhetoric says that we will lose 750,000 jobs if congress doesn’t agree with a balanced (code for massive tax increases) approach and we could be thrown back into recession. Does Obama explain how more jobs will be created by transferring another $1,200 billion from the private sector to government?
Obama thinks Americans are so stupid they would believe the miniscule 2.4% decrease in the increased rate of spending would cause a recession. Obama should learn the answer to that belief with his plummeting approval rating. Seems Americans don’t like being taken for dupes. What does this do for confidence?
Of course the president never tells the whole story. The 750,000 job losses are over ten years. Nor does Obama mention the number of jobs that could be created if that money remains in the hands of the private sector.
Obama stooges including Napolitano and Duncan were exposed this week for lying about the harm caused by the sequester. It’s really bad when liberals at the Washington Post and Politico exposes six blatant lies when fact checking that the president is using to try and leverage tax increases. Ironic how the president is now attempting to manufacture harm to leverage tax increases that will cause harm. Are these actions confidence inspiring?
So much for confidence. What about that extra jingle in the consumers pocket? Falling real incomes, savings rates, rising gas prices are now joined by rising insurance costs. HHS released 700 pages of new rules late last Friday that included an additional $100 billion in charges to insurance companies.
It’s a good thing those companies will absorb those extra costs and won’t pass them along to consumers.
Will housing continue to lead to recovery? If housing is dependent upon consumer spending resulting from more disposable income and rising confidence, what do you think?
The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International.