More mixed messages
from Peter Radford
Tuesday’s report from Case-Shiller suggests the US housing market is recovering. Finally. The latest figures are for June and show a second straight month of price gain. Clearly home prices have hit bottom and are bouncing back at least a bit. That ought to bolster the economy later in the year as households breath a sigh of relief that their major asset is no longer fading but is strengthening. Even if only a little.
The June gain, at 2.3%, was strong enough to push prices into their first year-on-year gain for two years. Even though that annual gain of 0.5% was low, it marks a significant turning point in the market. Better yet: every one of the twenty major cities covered by the survey registered gains with, as we would expect, some of the most depressed showing the most rapid price increases. Detroit, for instance, saw prices rise by 6%, whilst Minneapolis saw a rise of nearly 5%. The good news is that the gains were so widespread. This is the first time for a while that prices rose consistently across the entire nation. Couple this with the results of other surveys – CoreLogic’s data has the year-on-year gain at a more robust 2.5% – and the upbeat tone in new home construction, and it is obvious that real estate, so long a drag on the economy, has found a bottom and is crawling out of the hole.
But let’s not forget how deep that hole was. Even with June’s gain prices are still about 31% below their peaks, and are not likely to recapture those levels for many a year. Nonetheless the depressing factor that home prices exerted on the economy is abating. That’s good news.
Today’s bad news is that consumer confidence in the USA continues to ebb. The Conference Board released its latest survey results this morning – its index dropped to 60.6 in August, a nine month low, compared with July’s 65.4. August’s disappointment continues a downward trend of three straight quarters and suggests that households will be less inclined to spend as the year progresses.
The air of negativity and uncertainty stems from the 42 month long spell of unemployment being above 8%, the lack of wage increases, and the endemic political conflicts in Washington.
The latter ought not be ignored. The collapse of compromise and the unrelenting attacks on Obama by the hard right of the Republican party have produced a pervasive feel of hopelessness across the country. The crisis was met not by an air of cooperation in order to fix the nation’s ills, but by a kind of political trench warfare that engulfed everything. Progress cannot be made until the air is cleared and until the extremists are eliminated from the discussion. Unfortunately that cleansing is not yet underway, although the longer term evidence suggests that this election is likely the high point for the right wing: if they don’t win now they will start to face an ever more difficult fight as demographics shift markedly against them. The extremist libertarian agenda, designed as it is to destroy the American post-war social contract and replace it with a viciously anti-social quasi 1850′s vision that undermines recent gains for women and minorities, is self defeating in face of those demographics. After all it is exactly the groups most hated by the current Republicans who will begin to dominate the electorate beginning around 2020. Many of the more savvy right wing strategists are aware of this emerging problem, but their party, having sold its soul to the religious, libertarian, and racist extremists faces a steep and difficult makeover if it is to return to any semblance of centrist politics. The probability of success diminishes daily as some new face emerges on the right to express an ever more extreme or oddball viewpoint. Meanwhile Romney, who, given the economy, ought to be romping away with the election, is hobbled by the grab bag of positions that clutter his party platform. He has failed totally to face down the right which suggests he cannot govern from the center. This implies that a Romney win will simply invert the current impasse with the Democrats this time playing the role of obstruction. An Obama win, in contrast, holds the vague hope that we may break the deadlock. After all were he to win he can claim to have repudiated the Republican platform and to have won the right to continue with whatever they objected to the most.
The longer the obduracy and hatred persists in Washington the longer it will be before the average voter regains confidence in the political process. This, in turn, prolongs the feeling of malaise, disaffection, and uncertainty.
Which is why we keep getting days like today: full of more mixed messages.