Only “Number Jesters” report 2Q economic growth at 4% pace
Economic revisions infuriate
While on the surface of it Wednesday’s economic news from Reuters, as reported by FOX Business, “U.S. Economy Grows at 4% Pace in 2Q,” seems positive, I am not holding my breath given the fact that early reports like this one have been revised downward time and time again. In the FOX piece they quote the Commerce Department as indicating on July 30that, “Gross domestic product expanded at a 4.0% annual rate as activity picked up broadly after shrinking at a revised 2.1% pace in the first quarter.”
How convenient it is that these latest numbers seem to offset the dismal contraction number of 2.9% from the first quarter, I’m sure it’s just a coincidence -- right?
As has been articulated by others, I suggest that if an economist or economists continue to miss the mark by under-forecasting economic growth and then back-pedal by saying the revised numbers were “unexpected,” they should disqualify themselves from being called economists.
“Number-Jesters” would seem to be more appropriate.
In a completely related article in USA Today, written by Paul Davidson also on July 30, “Economy heats up in Q2 after harsh winter,” the writer comments on all of the seemingly optimistic information put out by the Commerce Department as reported on by FOX Business, but ends the particularly “spun” article with the following:
“Bad weather has not been the only culprit [regarding sluggish economic growth so far this year]. Wage gains have barely kept pace with inflation, holding back consumer spending. And the pace of housing's recovery has fallen behind last year instead of accelerating as forecast. Many economists expect both wage increases and the housing market to pick up in the second half of the year.”
Who wouldn’t want to trust the forecasts of these “Numbers Jesters?” At least they acknowledged the falling housing “recovery.” And does anyone still believe it was bad weather that drove the bad economic number in the first quarter?
It is also worth noting that within the FOX piece it was stated that “A separate report showing private employers added 218,000 jobs to their payrolls last month, a decline from June’s hefty [their description] gain of 281,000, did little to change perceptions the economy was strengthening.” What a shock, since, as we have said on numerous occasions, that these numbers are not impressive on the surface, let alone when scrutinized. After all, the vast majority of these jobs are either part-time or lower paying jobs that have little if any positive impact on the economy in general, nor the employees hired in particular.
And I loved reading this within FOX’s report: “Solid demand, which underscores the economy’s firming fundamentals, led to some pick-up in price pressures in the second quarter, a welcome development for Fed officials who have long worried about inflation being too low.”
I have a message for the Fed: HELLO! Millions of middle-class Americans DO NOT believe that inflation is too low! Have you been to the super market lately, people? But wait, there’s more, as stated in this same report, “A core price measure strips out food and energy costs at a 2% pace…” Well, add in food and energy and then tell us inflation is “too low.”
Relative to the housing “recovery” and foreclosure activity I offer the following observation: Amy G. Dix, broker and co-owner of The House Store, a successful Knoxville, Tennessee-based real estate company reports to me that REO assignments are on the rise.
“We have received one or two assignments each day over the past couple of weeks,” said Dix. “Some are coming from asset management companies that we hadn’t received assignments from in quite a while.”
While in West Palm Beach for an industry seminar recently I had the opportunity to visit with over 30 members of the National REO Brokers Association, who were among over 400 real estate professionals at the session. Most of the NRBA members also reported increased listing activity on REOs. This is, perhaps, only anecdotal evidence of a worsening housing market and general economy, but it is clear to me that the downturn that I and other industry observers are predicting may be closer than anyone thought.