The Debate Continues: Is it recession or just our fear of recession?
May 8th, 2008 by Ben Parr | No Comments yet - Be the first!The news and blogosphere continue to have an evolving debate over the condition of the economy. Joe Markman at MSN Money and James Pethokoukis of U.S. News and World Report both give optimistic assessments of the economy.
Markman asserts that the economy has not crashed as the bears have feared (i.e. the economy still grew in Jan-March, though only by 0.6%) and that money is flowing back into the economy. Pethokoukis points to statements from the White House’s Chief Economic Advisor Edward Lazear and to Wal-Mart beating expectations as indicators that the economy isn’t going to hell.
Of course, it wouldn’t be a debate without a lot of people claiming the opposite. The Big Picture blog makes the assertion that there’s often positive signals and growth before an economy falls into recession (wait, wouldn’t an economy always grow before it shrank though?). But a far more sobering picture is painted by the Economist of the housing bubble. Here, let me give you a quote from the article:
Mr Bernanke’s maps use figures from the Office of Federal Housing Enterprise Oversight (OFHEO). Its statistics have broad geographic reach and track repeat sales of the same house. The monthly national index suggests average prices have fallen only 3% from a peak in April 2007, and the quarterly figures are still positive. But OFHEO’s figures include only houses financed by mortgages backed by the government-sponsored giants, Fannie Mae and Freddie Mac. They leave out the top and bottom of the market—where prices rose fastest during the bubble and where the mortgage mess was most severe.
The article states that investors expect a 11-13% correction of housing prices (prices will keep dropping and foreclosures will keep rising), but some of the hardest hit states, like California and Flordia, could see another 25%.
Regardless, the debate continues, and we’re not going to know for another 3-6 months what direction the economy will take. Even then, there could always be a sudden nosedive.
Filed under News and Analysis