published Sunday, July 31st, 2011

U.S. economy taking a beating

It's doubtful that many Americans are taking much comfort in the Obama administration's assurances that our country is in a recovery.

Consider this unflattering snapshot of the economy:

n In the last nationwide unemployment report, the jobless rate rose from 9.1 percent to 9.2 percent. Layoffs were recently at their highest level in nearly a year, and another weak employment report is predicted next month.

* In the latest unemployment reports from the states, joblessness rose in 28 states plus Washington, D.C., stayed the same in 14 states and fell in only eight states. Regionally, unemployment rose from 9.7 percent to 9.8 percent in Tennessee, from 9.8 percent to 9.9 percent in Georgia and from 9.6 percent to 9.9 percent in Alabama.

* Overall economic growth has been weaker than expected -- and much weaker than hoped for -- this year.

* Gasoline prices remain painfully high -- in part because of overseas disruptions that the United States cannot control, but in part because the federal government has imposed undue restrictions on oil exploration and production in this country.

* The housing market remains depressed. Hundreds of thousands of families are facing foreclosure in coming months, on top of millions who have already lost their homes. Home values, meanwhile, remain low, and many mortgage holders owe more than their homes are worth on the market.

The weak housing market prompted this observation from Scott Banks, a cabinet and countertop installer in the Atlanta area: "There is no comparison to five years ago," he told the Atlanta Journal-Constitution. "The difference is, we have gone from running 10 crews to two crews, part time."

The combination of these troubling factors -- plus weak income growth -- is keeping consumer confidence down. That is worrisome because consumer spending accounts for perhaps two-thirds of our nation's gross domestic product, the total annual economic output of the United States. Lack of healthy consumer spending on goods and services hamstrings businesses' ability to expand their operations and hire more workers.

Growth is also hampered by the threat of higher taxes and heavy but still somewhat uncertain new regulations under ObamaCare. Many companies simply do not know whether the federal government is going to impose policies that are going to make it unprofitable to hire new employees.

Washington cannot snap its fingers and get consumers to rush out and start to buy goods and services. But Washington can stop saddling our country with complicated regulations and increased taxes that make it harder for businesses to invest and for our economy to really start recovering.

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dfclapp said...

I doubt the issue is that people don't see we have a problem. They simply see different causes and solutions. One side can look at the continuing Bush tax cuts and see how little an effect they had on creating jobs, preventing a recession, or lowering debt before Obama took office. One side can look at spending less, i.e. just instituting cuts, as dampening growth. The credibility gap for both parties is a failure to agree on the sacred cow that needs to be slain. Our taxes on the wealthy are not as high as those in other industrialized nations, nor is our crisis as bad as most. Where we have awed outsiders most lately is in our government elected officials' inability to solve relatively simple problems by consensus.

July 31, 2011 at 5:56 a.m.
Plato said...

"Home values, meanwhile, remain low, and many mortgage holders owe more than their homes are worth on the market."

The problem with the economy is indeed the horrible housing market as pointed out in this piece. 10 Trillion dollars of private citizen wealth vanished during the Bush recession, most of that being home equity, and we are only slowly recovering from that. You can't take that much money out of the economy and not feel it big time. If Washington wants to solve the unemployment issue they need to focus on curing the housing market.

"Many companies simply do not know whether the federal government is going to impose policies that are going to make it unprofitable to hire new employees."

This is a ridiculous argument that has no grounding in fact nor even common sense. Companies with over 50 employees know right now what they will pay. They either sponsor a health care plan or pay $2000/year/employee fine. That would constitute 4% of payroll cost for an employee making $50,000 per year. If a company's margins are running THAT thin they are likely not going to be around very long anyway. This is a really silly argument and is purly political in nature. It has very little if anything to do with the high unemployment rate. Lack of demand is the primary cause.

July 31, 2011 at 10:45 a.m.
webgent said...

I think our biggest problem is the cost of healthcare and I don't think anyone really knows how to fix it, or can't come to an agreement on how to fix it.

August 1, 2011 at 11:50 a.m.
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