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Economy on a steady course despite job scare
Housing revival is forecast
Question of the Day
The steady rise in state revenues is providing relief to arguably the nation’s second most distressed sector after housing, enabling governments to curb layoffs and consider selective increases in spending for the first time in years. States overall are planning a 2.2 percent rise in spending next year, the budget officers group said.
Meanwhile, surveys of the nation’s manufacturing and non-manufacturing sectors by the Institute for Supply Management last week showed that they continued to grow in May despite a hesitancy to hire among businesses worried about potential fallout from the slowdown in China and recession in Europe.
The Fed also reported last week that its surveys showed that modest growth continued across the country. Fed Chairman Ben S. Bernanke indicated in testimony that he wasn’t jarred by the recent slowdown in job growth, which he predicted after job gains unexpectedly surged this past winter under the influence of unseasonably warm weather.
“Although the jobs numbers were undeniably soft, we think there are conflicting signals” suggesting the economy is doing better than many people think, said Joseph G. Carson, U.S. economist at AllianceBernstein.
He said he thinks the economy is in transition from a recovery led by exports and business investment to an expansion driven by housing construction and consumer spending.
While wage and income growth has been tepid, consumers are benefiting tremendously from extraordinarily low interest rates, enabling them to shed debt and lower their monthly debt payments, he noted. That has the effect of increasing buying power without an increase in income.
Mortgage refinancings, in particular, are surging with 30-year mortgage rates having dropped to record lows of less than 4 percent in recent weeks.
Mr. Carson noted that the current scare prompted by dwindling job growth isn’t the first for the U.S. economy. The same thing occurred last summer, he said, and at that time, many forecasters and pundits proclaimed “the U.S. economy was on the verge of a dramatic slowdown or double-dip recession.”
Those predictions proved to be far off the mark, he noted.
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