U.S. economy flashing conflicting signals in areas like housing, spending and jobs
WASHINGTON — Anyone puzzled by the most recent U.S. economic data has reason for feeling so: The numbers sketch a sometimes contradictory picture of the economy.
We've learned that:
Consumers are more confident but aren't spending much. Fewer people are losing jobs, but not many are being hired. Home and stock prices are up, but workers' pay is trailing inflation. Auto sales have jumped, but manufacturing is faltering.
This is what an economy stuck in a slow-growth rut can look like, and it's a focal point of the presidential campaign. The U.S. economy grew at a scant 1.3 percent annual rate in the April-June quarter — too weak to reduce high unemployment. And most economists foresee little if any improvement the rest of the year.
Here are some of the mixed signals recent economic reports have sent with the election now five weeks away:
After plunging when the housing bubble burst, home prices are finally rising steadily, according to the Standard & Poor's/Case-Shiller index. The index rose in July compared with a year earlier. That was the second straight year-over-year gain. Still, the annual pace of new-home sales dipped in August from a two-year high in July. At the same time, sales were nearly 28 percent above the level a year earlier
Looking Ahead: Record-low mortgage rates are likely to keep homes affordable. The Federal Reserve's decision to spend $40 billion on mortgage bonds each month until the recovery accelerates should keep rates low and increase home sales. Rising builder confidence also suggests that construction will keep growing. But many Americans lack the credit to qualify for a mortgage. Or they can't afford the larger down payments now required.
Americans are feeling better about the economy despite chronically weak job gains and pay levels that lag inflation. The private Conference Board's index of consumer confidence is at a seven-month peak. A survey of consumer sentiment by the University of Michigan has reached its second-highest point in nearly five years. Both surveys found that consumers are lukewarm about current economic conditions but more optimistic about the future.
Looking Ahead: Without more hiring and stronger pay raises, the recent gains in consumer confidence might not last.
Businesses appear to be less confident than consumers. A survey of chief executives of large U.S. companies has found their outlook to be at its most pessimistic level since the fall of 2009 — just after the recession officially ended. Orders for long-lasting factory goods plummeted in August. In part, that reflects Europe's financial and economic crises, which have reduced demand for U.S. exports. Six European countries are in recession. More are expected to follow.
Looking Ahead: Many corporate executives lack confidence in part because of fears that the U.S. economy will fall off a "fiscal cliff" early next year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget deal. Those changes could throw the economy into recession. But business spending and hiring could pick up if the budget issues are resolved.
Americans spent more in August. But that was mainly because they had to pay more for gas and some other items. Adjusted for inflation, consumer spending barely rose in August.
Looking Ahead: Spending will likely grow sluggishly without bigger increases in workers' pay and perhaps a moderation in gas prices.
The number of people applying for unemployment benefits fell sharply in the week ending Sept. 22. That suggests that the weak job market could strengthen. Employers added just 96,000 jobs in August — barely enough to keep up with the growth of the working-age population. The unemployment rate did fall to 8.1 percent from 8.3 percent. But that was because many people gave up looking for work, so they were no longer counted as unemployed.
Looking Ahead: The September jobs report will come out Friday. Economists think the economy will show a modest gain of about 100,000 jobs. Given employers' anxiety about the U.S. fiscal cliff and Europe's economic crisis, few expect a significant pickup in hiring soon.
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