Housing Shows There Is No Recovery

Housing starts are a tried and true barometer of business activity. If there was a real economic recovery going on in the economy, housing starts would be, at the very least, edging up. Please keep in mind the government is providing some of the lowest mortgage rates in a generation. A 30-year mortgage is around 4.75%. This week, the Commerce Department reported housing starts were down 4.3% last month. Here’s how this was couched in the opening line of a Bloomberg story: “Builders began work on fewer homes than projected in December, a sign the industry that triggered the recession continued to struggle more than a year into the U.S. economic recovery.” (Click here to read the complete Bloomberg story.)

“More than a year into the U.S. economic recovery.” What recovery? I feel Bloomberg does a better job than most reporting the financial news, but I cannot figure out why nearly all reporters universally keep beating the “recovery”drum when there is no actual proof of a sustained recovery.

The same Bloomberg story quoted above backs up my contention. It said, “Boston Fed President Eric Rosengren is among central bankers concerned growth won’t exceed 4 percent this year because the housing recovery is likely to be weaker than usual, given the tightening of lending standards and high vacancy rates. “If housing-related growth is not going to boost the recovery this time around, we may need policy — particularly monetary policy — to continue playing a stimulative role,” Rosengren said in a Jan. 14 speech.”

Why in the world would the Fed need “to continue playing a stimulative role” if there was, in fact, a sustained recovery? The answer is simple—there is no recovery. For example, just this week, American Express announced it is closing a call center in Greensboro, North Carolina. It is one of four in the U.S. 1,900 high paying white-collar jobs will be gone by the end of the year. Does this sound like a growing economy where credit is being extended? This is not just the loss of those jobs, but it will cause a ripple effect. For instance, Am Ex and its employees contributed $250,000 last year to the local United Way. (Click here ro read more on the Am Ex call center closing.)

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