Are We Sure These Are Good Signs?

It is being reported that existing home sales are starting to rebound.

Well, duh! After the market price of a home drops 18+% in a single year and the government is paying first time buyers $8,000 to buy a house what would you expect? A $150,000 house is now worth $123,000 minus a $8,000 coupon (on the taxpayer’s dime) = $115,000. Is it a good sign though?

The Realtors' association says that based on historical data, the pending sales numbers do closely track future sales. But the correlation is much stronger in the year-over-year data than it is in the month-over-month numbers. The increase over March 2008 was much more modest, just 1.1%.

Historical context may mean nothing in this downturn. Despite what big banks are telling Congress, it's very difficult to get a loan these days. Buyers who have been pre-qualified by lenders often find it's a different story when they actually request the money. The down payment or interest rate required could be larger—or the money might not be there at all. The volume of paperwork required to get a loan has also surged, creating more opportunities for buyers to be disqualified. "We're hearing anecdotally that lenders are backing out of funding," says Jim Gaines, a professor of real estate studies at Texas A&M University. "They're only going to give you the money if you don't need it."

New unemployment claims are up, but continuing claims are down slightly.

How much of this is due people running out of benefits and how much of this is due to unemployed workers accepting low paying jobs to get by? I wonder what the true unemployed/underemployed numbers are?

The government says that 4.5 percent of the work force has been out of work for 15 weeks or more. The worst previously seen — at least since 1948, when the government began counting people that way — was 4.2 percent, in December 1982.

Put another way, 21 percent of those who are unemployed have been out of work for at least 15 weeks. That is also a record, exceeding the 19.6 percent proportion seen during the 1958 recession.

Since employment peaked in 2007, the number of total jobs is down by 4.3 percent, and the number of private-sector jobs is down by 5.4 percent.

Those figures exceed the peaks since 1950 of 4.2 percent and 5.2 percent, respectively, set in that 1958 recession.

The number of jobs over all is now down 6 million from the peak, while private-sector employment is off 6.3 million from the high.

If any of these numbers reflected those that had exhausted their benefits and were still out of work it would make the comparisons to the numbers in past years more of an actuality and not a fantasy. In the 1980's the way that these numbers were calculated started to be "cooked" to make it look as if the job market was better than it was.

It is being reported that the economy declined 1% in the second quarter. This is less of a decline that the previous quarter.

It’s still declining! The definition of a recession used to be that the economy is expanding, but a a slower rate. A depression was defined as the economy actually declining. The press seems to have added a new classification. If the economy is declining, but at a slower pace it is classed as “recovery”. They even have graphs to prove that everything is getting better - proof positive - not.


Don Quixote



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