Weekly Observation for February 27, 2010 The Good, Bad, and the Ugly
February 27th, 2010Ought oh. During the State of the Union Address on January 27 President Obama told America he was pivoting from health care reform to making jobs his number one priority This was good news because as I have shared with you here the fate of the housing market will be determined by jobs, consumer confidence, and interest rates.
What has the president and the congress done since that speech? After a quick campaign stint around the country by the president and vice president touting on the anniversary of the passage of the Stimulus bill, how well it worked, they returned to Washington to focus on health care.
The house had already passed a quote “jobs” bill that was labeled Stimulus II at an estimated cost of $157 billion dollars. This week the senate passed their jobs bill, a slimmed down version at a cost of $35 billion. Included was an incentive for businesses to hire with the government waiving social security withholding for the first year on all new hires that were on unemployment, and a $1000 bonus if the business kept that employee for one year.
That’s like taking a squirt gun to a six alarm fire. We have about a $12 trillion economy of which $35 billion is about three one thousands of a percent. That would be like a seller who hasn’t received any offers attempting to stimulate activity by lowering their asking price from $150,000 to $149,999.99. In other words the senate is applying window dressing to a severe wound, while adding another $35 billion to our debt. Does this make sense to you?
If jobs are key to the housing market then the news this week was down right ugly. Experts were shocked when first time claims for unemployment jumped to 496,000 following the unexpected jump to 473,000 the previous week. This is not good news as experts were hopeful the jobs market was correcting itself with earlier trends. Economists say during a healthy jobs market new claims for unemployment run around 350,000 a week. It doesn’t appear the president’s rosy claims that the Stimulus worked jive with the reality of these unemployment numbers.
On a brighter note the government said fourth quarter growth was better than the 5.7% reported and was adjusted up to 5.9%. Most economists say the increased production is due to businesses restocking inventory, and felt it doubtful that pace of growth could be sustained, and that the rate of economic growth would be determined by consumer spending.
If that’s the case the news about consumer confidence this week doesn’t bode well. After confidence jumped to a scalding revised 56.5 reading in January, (FYI a reading of 90 means solid economic footing, a reading over 100 means economic growth), experts expected a slight decrease in February to 55. Viola! Consumer confidence fell nearly 11 points to 46 for the second lowest level of consumer confidence since 1974.
Seems my blog on January 31 “Springfield Illinois Housing Market, Home of Resiliency” was prescient when I stated; “With all the proposed actions of government, federal and state, it is miraculous the confidence index surpasses 50.” I am beginning to doubt the U of I Economics Applications Laboratory prediction that Springfield confidence may rise to 70 in 2010.
In other bad news which was down right ugly, it was reported that new home sales dropped by 11.2% in January to the lowest level on record, but don’t worry folks they’ve only tracked these numbers for 50 years. As with most articles you have to read the whole story, as with the one in the SJR in this past Thursday’s Business section with the bad news headlines, revealed in the last paragraph that new home sales increased in the Midwest by 2.1%. With snow in the 49 continental states, I’m sure weather had an impact upon these dismal numbers.
The parade of bad economic news continued yesterday when it was reported that existing home sales fell across the nation to the lowest levels in 8 months. Down a little over 7%. Together with new home sales a very disappointing result when you consider this happening when interest rates are near record lows, and there are tax incentives to buy a home.
Then the parade of bad news continued in today’s SJR Business section with the headlines; Economic recovery likely slowing. A short quote just to give you a flavor of the AP article; “The economy continues to grow, but it won’t feel like much of a recovery this year amid high unemployment, record high foreclosures, and tight credit.” Any questions?
Yes, my question; if government spending creates jobs, why no jobs? The government has spent trillions of dollars keeping interest rates low, pumping cash into the money supply, bailing out banks, buying car companies, and in stimulus spending. Why no jobs? Because Keynesian theory the president puts his full faith into, does not work. It is a liberals myth, otherwise we would have more jobs than people to fill them. All we have to show for the most profligate spending in our history, including the Great Depression, is a debt that will enslave future generations.
Oh well, back to the bad news, following the health care summit between Democrats and Republicans moderated by President Obama, all indications point to the Democrats forcing the health care reform bill through without any bipartisan support, and against the will of the American people. This is bad news. The proposal contains $500 billion in new taxes that falls primarily upon the backs of small businesses, and will cost $2.5 trillion dollars adding to already unsustainable debt.
Small businesses have been reluctant to hire because they are frozen in fear with the taxes they are being threatened with by not only the federal government, but also local, and state government. Don’t look for any significant job creation as a result, especially in Illinois.
If the health care reform is passed taxing small businesses, and the state passes an income tax increase, then regrettably, the U of I Economics Applications Laboratory may be low on their forecast that Illinois will lose another 100,000 to 200,000 jobs this year. If the fate of the housing market will be determined by jobs, you can draw the conclusion.
Ninety percent of the government’s actions have hurt the economy more than helped the economy. From Bush’s TARP, to Obama’s Stimulus, Health Care Reform, proposed tax increases, and Cap and Trade the free market capitalism of the United States in under attack, and by our own government. As long as our leaders believe government is the solution and not the workers, small business owners, and entrepreneurs in the economy, be prepared for a freight train of bad news to continue.
OMG Pfister are you full of Doomsday today? No, not full, there is GOOD news to report for Springfield! Recall this statement I made in my resiliency blog on January 31;
“Don’t worry because now in my third decade as a full time Realtor, Springfield always proves its resiliency, and performs better than anyone ever predicts. Springfield has a tendency to perform the opposite of the nation. That’s not always true, however more so than not.”
January home sales tank across the nation, in Springfield home sales were up, the median sale price was up, and the inventory at the lowest levels since 2005. See good news for Springfield compared to the nation. See there was a sliver of good news this week. At least for now. Although we are performing better than the nation, we still are running below normal levels of activity for this time of year.
Make this a great week from Fritz and Kristie Pfister and The Pfister Success Team Inc. of RE/MAX Professionals Springfield. Due to the success of our marketing systems we have immediate openings for 13 residential listings. If you or someone you know needs to sell their home call us at 217-652-7653.
The opinions expressed here are solely those of Fritz Pfister, or identified sources, and not those of RE/MAX Professionals Springfield, or RE/MAX International.
