Economic blessings for which to be thankful

As yet another week begins, a spate of depress­ing news seem to be unfold­ing. In the Euro­pean Union, many ana­lysts seem to be com­ing to the con­clu­sion that the “land­mark” agree­ment to save the Euro-zone from poten­tial mon­e­tary col­lapse may be unwork­able. Not to be out­done, here in the U.S. the Con­gres­sional “super-committee” that was charged with find­ing a min­i­mum of $1.2 tril­lion in deficit reduc­tion has thrown in the towel and admit­ted fail­ure. Given the debt-ceiling expan­sion agree­ment from ear­lier this sum­mer, that means $1.2 tril­lion will be auto­mat­i­cally cut on an across-the-board basis among impacted pro­grams, encom­pass­ing vir­tu­ally all fed­eral spend­ing cat­e­gories out­side of the enti­tle­ments such as Social Secu­rity, Med­ic­aid and (most of) Medicare.

Despite the very depress­ing nature of these most recent influ­ences, there really are some eco­nomic devel­op­ments in this coun­try which, in their very mod­est way, ought to be celebrated.

For exam­ple, late last week and early this week sta­tis­tics regard­ing the belea­guered hous­ing sec­tor indi­cate a bot­tom may have been found and the long, labo­ri­ous slog toward sus­tain­able recov­ery can begin. First and fore­most, delin­quency rates asso­ci­ated with home loans are start­ing to drop, with the most vis­i­ble improve­ment com­ing in the early stages, that is, 30-day delin­quency rates. Since these fig­ures rep­re­sent the early stages of the delin­quency “pipeline,” a falling num­ber here — if it con­tin­ues — should move through the sys­tem and allow longer-term delin­quency sta­tis­tics to improve over time. Sadly, despite bet­ter delin­quency fig­ures, the lat­est num­bers on home fore­clo­sures showed a slight tick upward, indi­cat­ing that the fore­clo­sure slow­down from ear­lier this year may have resulted from finan­cial insti­tu­tions hold­ing back so as to cor­rect prob­lems asso­ci­ated with the “robo-signing” mess. Obvi­ously, this fore­clo­sure rise was not a good sign.

But then, other housing-related devel­op­ments gave rea­son for opti­mism beyond just delin­quen­cies. Octo­ber hous­ing starts showed sta­bil­ity after a good increase the prior month, and the num­ber of Octo­ber build­ing per­mits rose sharply, sug­gest­ing favor­able oppor­tu­ni­ties for addi­tional res­i­den­tial con­struc­tion over the next sev­eral months. As well, the num­ber of exist­ing home sales in Octo­ber rose by nearly 2 per­cent; not a great num­ber, but far bet­ter than the decline that was antic­i­pated. And with more exist­ing homes being sold, even with fore­clo­sures increas­ing very mod­estly, the inven­tory over­hang on the hous­ing mar­ket is begin­ning to slowly burn off.

Good news is not lim­ited to the hous­ing sec­tor, how­ever, with GDP sta­tis­tics for the third quar­ter indi­cat­ing busi­nesses remain at least some­what opti­mistic about the future given a 13.1 per­cent aver­age increase in inflation-adjusted spend­ing on new equip­ment over the past nine quar­ters. As well, with busi­ness inven­to­ries very well con­trolled, the pos­si­bil­ity exists for increased man­u­fac­tur­ing pro­duc­tion sched­ules as 2011 ends and 2012 begins. The 0.7 per­cent gain in indus­trial pro­duc­tion for Octo­ber pro­vides some hope for such an outcome.

And favor­able news is not lim­ited sim­ply to the domes­tic front. The most recent GDP data indi­cate that dur­ing three of the past four quar­ters, Amer­i­can exports have grown more vig­or­ously than the vol­ume of goods and ser­vice imported from abroad. As such, our net export posi­tion has improved for much of the past year by becom­ing mod­estly less neg­a­tive and thereby pro­vid­ing an envi­ron­ment within which export-related pro­duc­tion and job growth might be possible.

Finally, speak­ing of job growth and U.S. labor mar­ket activ­ity, the unem­ploy­ment rates for both the U.S. and Ohio have edged down slightly over the past two months from 9.2 per­cent in August to 9.0 per­cent by Octo­ber. While this is cer­tainly not a per­for­mance worth cel­e­brat­ing at this late junc­ture of a recovery/expansion, it does pro­vide some evi­dence that the resilience of the U.S. econ­omy con­tin­ues to be under­es­ti­mated and good eco­nomic results, how­ever mod­est, may unfold slowly as time progresses.

With all of these pos­i­tive devel­op­ments that I have out­lined, one could most cer­tainly point to off­set­ting neg­a­tive influ­ences. But some­times it seems rea­son­able to stand back and mar­vel that the U.S. econ­omy con­tin­ues to expand despite the seem­ingly unend­ing capa­bil­i­ties of mon­e­tary and fis­cal pol­i­cy­mak­ers, both domes­tic and for­eign, to foul up the atmos­phere within which both peo­ple and busi­nesses must adapt and attempt to pros­per. And despite the uncanny capa­bil­i­ties of politi­cians to blun­der time and time again, the U.S. econ­omy con­tin­ues to chug along. If this doesn’t give us all good rea­son to pause and be thank­ful for our eco­nomic bless­ings, I’m not sure what does.

Dr. James New­ton serves as chief eco­nomic advi­sor to Com­merce National Bank and is an aux­il­iary fac­ulty mem­ber in eco­nom­ics and sta­tis­tics at OSU-Marion and OSU-Newark. Dr. Newton’s views do not nec­es­sar­ily reflect those of Com­merce National Bank or OSU-Marion/Newark.

Posted by Jim Newton on Nov 22 2011. You can follow any responses to this entry through the RSS Feed. Comments can be made below.