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Green Shoots? (photo: wanpark2/flickr)
Last summer news reports were filled with ill-informed predictions of a double-dip recession. Now there seem to be many accounts that misrepresent recent economic data to make a case for substantially stronger growth.
Robert Samuelson makes some of the standard errors in outlining a case for optimism. (In fairness, the column also presents a case for pessimism.) For example, he touts the jump in housing starts reported for November, saying, “Housing construction was up 9.3 percent in November over October and 24.3 percent over November 2010.”
The increase in starts reported in November was almost entirely attributable to a jump in starts reported for multi-family units. Multi-family starts are highly erratic and frequently have large month to month rises and falls. Starts of single-family homes were actually 1.5 below their November, 2010 level.
The piece also refers to a jump in pending home sales reported for November. This is a measure of contracts signed. The National Association of Realtors reports that many more contracts are now falling through than in the past, so this rise in contracts does not likely mean a corresponding rise in sales. (In this vein, purchase mortgage applications are running even or below their year ago level.)
The column also notes that recent construction levels have been well below the number needed to keep even with household growth. This is correct, but we are still far from making up for the overbuilding of the bubble years as indicated by the fact that the vacancy rate remains at near record levels.
(There have been some questions raised about the accuracy of the Census Department’s data, claiming that it overstates the number of housing units in the country. Those raising the issue fail to note that measures of housing starts do not include housing units that were created by conversion of commercial or industrial property, such as an old warehouse being turned into condos. The rehabilitation of dilapidated units would also not be included in housing start numbers. There were many cases of both ways of adding to the housing stock during the bubble years. Also, it is important to note that the Census data is giving the percentage of units that are vacant. The critics of this measure must show how the Census methodology would lead it to overstate the share of units that are vacant.)
Finally, the piece notes that household debt levels have fallen since the beginning of the recession, implying that there could be a consumption boom as families are now better positioned to make major purchases. While debt is down, so is wealth. Households have lost close to $8 trillion in housing wealth and another $4 trillion in stock wealth. This would be expected to lead to a sharp drop in consumption through the wealth effect.
At present the saving rate is close to 4.0 percent. This is considerably above the near zero rate at the peak of the bubble, but well below the 8.0 percent average of the pre-bubble years. It seems more likely that, given this massive loss of wealth, the savings rate would be more likely to rise than fall, especially with tens of millions of baby boomers approaching retirement with the prospect of having almost nothing other than their Social Security to support them.
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“Nothing other than their Social Security to support them.”
The Congress was debating cutting even that, last Summer. It was amazing the surprise that those people expressed to the anger that welled up and boiled over this past Fall. And it’s very obvious that Robert Samuelson is one of those “can’t walk and chew gum” guys when it comes to that anger. There are a lot of those. Andrew Ross Sorkin is another. When he penned some of the lines in Too Big To Fail he got some of the incredulity of the public about being boosted for all that money. But when he turns around and speculates that we have to get the consumers back to spending, he can’t get it and prognosticate at the same time. And neither can Samuelson.
He just doesn’t understand that those boomers sat in endless, boring (at the time), lectures on their “financial future”, all with the same pie chart. 1/3 of their retirement was going to be the equity in their home, 1/3 was going to be their pension plan, and 1/3 was going to be their savings, which “we’re here to help you manage!”
And then Wall St. converted the pension plan to a 401(K) and gutted it and gambled it to nothing and crashed in 2001, converted the equity to loans and refi’s and gutted it and gambled it to nothing and crashed it in 2008, and converted the savings to stock plans, or credit cards and fees and usury level interest rates and consumer spending and gutted it and gambled it to nothing and now they want to re-start the economy with what?
Robert doesn’t know how silly he sounds, neither did Andrew.
How many?
don’t cha just know that since it’s an election year that we’re going to be hearing a lot of how rosy it’s looking.
We’ll know if it’s happening when the actual unemployment rate approaches 5-7% and when Medicaid rolls and food stamp and food bank usage decrease.
I ain’t seen that yet.
After clearing all the cookies from my browser — as a control experiment — I opened firedoglake. Then I looked at my cookie cache and found that “23 websites stored cookies or other data”, even though I block cookies except from the site I’m visiting. Then I deleted those cookies, looked and saw they were deleted, and clicked on the comment hyperlink to read the comments here at Dean’s diary. Looking again at my cookie cache — continuing the control experiment — I found that “16 websites stored cookies or other data”. (I can identify each of them, they aren’t undisclosed.) I may change my username to labrat.
It’s Criteo. They are selling extended eyeballs to internet vendors. So if you go anywhere at all on the internet, and then come here, you’ll find the other site follows you here. Because of that, lots of other sites portal inward and push through FDL onto you when you come here, hence the great cookie laying on your computer like an infestation of maggots.
Salon sells space to them too. Actually, a good case could be made that sites that support the 99% shouldn’t be caught dead selling space to Criteo, the ultimate datamining and surveillance corpie 1% product. It is to websites what Carrier IQ is to cell phones. Corporations that make you feel like you’re bathing in O’Hare Airport without a shower curtain.
I think it’s safe to say that the economy is going to stay at low growth (at or less than required to cover the growing population) for a long time. I think the “American consumer” has finally been fundamentally changed (i.e. they’re broke) and expecting them to “return to 2004 norms” will never happen. Most of the young people I know who have graduated from collage and have good jobs (engineers, nurses, i.e. professionals) have no interest in buying homes (they do buy new cars and trucks). Most teenagers I know think America is crooked and corrupt and aren’t too interested in being “good little consumers” at all. I honestly would be hard pressed to tell you what this all means other than that telling most Americans that “green shoots” are coming didn’t work in 2009 and it isn’t working now.
I think it’s safe to say most DC pundits are EXTREMELY out of touch with the American people, and that their babbling represents what the DC elites project on the rest of us for the 2012 election. Most of us really don’t give that much of a shit, the difference between Obama and Mitt is way to small to represent any hope or change.
I’ve been using the Disconnect add-on with Firefox to stop all the tracking. Seems to work OK. It does knock out certain features in some web pages.
Well, I controlled for what you describe by deleting all cookies and clearing that cache, and coming to FDL as a newborn with no trace of being anywhere prior, and being nowhere else prior. Most if not all the tracking cookies are set here at FDL, such as firedoglake.com; sitemeter.com; twitter.com; scorecardresearch.com; four kinds from google; adjuggler.net; chartbeat.com; chartbeat.net; and more. Usually YouTube.com also sets a cookie, but that may be a feature of my browser no matter where I go.
The Dow can burp up 30 points and they think the recovery’s in full force.
I saw Too Big To Faillast night on HBO and thought it was pure crap [and pure Sorkin]: shallow, cartoonish, complete failure to REALLY identify the culprits. Just “West Wing” type “drama.”
Dean, you would do us all a great favor if you’d write a “compare & contrast” between Robert “The Faker” Samuelson and Paul “The Real One” Samuelson. I fear all too many don’t know the difference.
I met/was taught by Paul – and have read business writer Robert for decades. The contrast is between a thinker and an essayist with little knowledge of his topic.
There are programs that deny these folks access – but then FDL loads much more slowly, and FDL income is reduced assuming much of the garbage cookies are handling google-ad money allocations.
Programs that protect your ports – not browser related – are another line of defense. You allow in, or not, those that come knocking.
Thanks for the info, Dean.
My only take away was that we are turning into a nation that is willing to rent rather than own when there is no lifestyle reason to own. I like you did not see an “up turn” in housing in the numbers.