August 25, 2005

The Economy (Ho) Hums Away: More Good Economic News They Think You Can’t Use

Filed under: Economy,MSM Biz/Other Bias,MSM Biz/Other Ignorance — Tom @ 11:07 am

In a 15-minute cruise through the major business news sources, I find at least four items of economic news that if they had occurred in mid-late 1990s would likely have received front-page level prominence.

1. Good news in the employment market:

New jobless claims sink: total claims lowest in 4 years

WASHINGTON (AP) — The number of Americans filing new claims for unemployment benefits fell last week and the four-week average of people receiving benefits dropped to the lowest level in more than four years.

The Labor Department said 315,000 newly laid off workers applied for jobless benefits, a decline of 4,000 from the previous week, providing evidence that solid economic growth is showing up in an improving labor market.

2. The same article also contains this hidden gem about likely economic growth in the current quarter:

Many analysts believe the economy, which grew at an annual rate of 3.4% in the spring, is powering ahead at an even faster pace above 4% in the current July-September quarter.

Imagine that.

3. The housing market continues to be strong (so the author has to water it down with bubble worries, even though contrasting data between new and existing home sales would ordinarily reduce the concerns about excessive speculation):

The Commerce Department said Wednesday that new home sales surged to a record in July, fanning the debate about whether the torrid housing market is an investment bubble poised to pop.

New home sales in July grew 6.5% to a seasonally adjusted annual rate of 1.41 million from 1.32 million in June, the government reported.

The government data contrast with numbers released Tuesday by the National Association of Realtors, which showed a slowdown in the market for existing homes. The trade group said July sales of homes fell 2.6% to an annualized rate of 7.16 million from June.

I believe a year from now we’ll still be hearing about the housing bubble that hasn’t happened but is just around the corner. Yes, there are problems with overleverage and loan quality, but the market’s self-correcting mechanisms seem to be reining in some of the excesses, as this article about REITs shows.

4. Finally, good news for long-term wealth distribution–”Biz Startups by Women, Minorities Surge” (with a really dumb mistake in the text):

NEW YORK (CNN/Money) – Boom goes the growth rate of businesses owned by minorities and women.

A Census Bureau survey shows that minority groups and women are outpacing the national average when it comes to owning their own business.

The Survey of Business Owners showed that the total number of businesses in the nation grew to 23 million in 2002 from 1997, with minorities owning about 18 percent of those enterprises.

The surging number of minority- and women-owned ventures helped the nation’s businesses rake in $23 trillion in 2002.

I don’t know what the right number is, but $23 trillion is laughably wrong, given that total GDP for the entire economy in 2002 was about $11 trillion at the time.

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2 Comments

  1. Joseph B said:

    Yes… the commerce department reported a record month in July for home sales. But what they didn’t report is that the median home sale price was down 7.2% in July and has dropped 14% in the last 3 months. This party is over.
    The Beginning to the End of the Housing Market?
    http://www.investmentu.com/IUEL/2005/20050825.html

    (comment inadvertently deleted by BizzyBlog but later inserted–I apologize for the error)

    Comment by TBlumer — August 26, 2005 @ 10:39 am

  2. #1–Joseph B’s point is interesting.

    I don’t have the answers, and I’m not going to say the drop in the median sale isn’t troubling, but I do have a number of questions (I can be a real pain when it comes to that):

    - Is there a reason to think that the geographic mix of new homes is different in the summer than it is in the winter? (I’m guessing yes, as new home sales happen year-round in CA, AZ, and Seattle, which I believe are among of the hottest areas, while they are compressed into April-Sept. in much of the rest of the country because of weather.

    - Is the rest of the country, where prices are lower, in the midst of a building spree that was taking place last year only in the high-end markets?

    - Is there a lot of mid-market and low-market housing coming onto the market now, while the high end has slowed down?

    - Is there a softening in new home prices but an increase in selling prices of existing homes?

    Without answers to those four questions, it’s difficult to determine whether pessimism is warranted.

    I also want to see what the latest OFHEO.gov report has to say. The second quarter report will be out on Sept. 1. I think it will point to a flaw in generalizing your point that “new home market prices have fallen 14% in the last three months” to the entire housing market. Your graph would predict that they will report a decline. I would guess that they will report an increase of 1%-2% during the quarter nationwide–relatively modest compared to the last couple of years, but an increase nevertheless. Because of geographic and demographic mix, it’s very possible that every market can show an increase while the nationwide median selling price goes down.

    I certainly don’t disagree with your advice in this area at the linked page.

    Comment by TBlumer — August 26, 2005 @ 10:55 am

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