With mortgage rates on the rise again toward the 4 percent level, partly in anticipation of the Federal Reserve suggesting it may begin tapering down its low-interest rate policy, home sales could be in for a decline.
Let’s take a look at the fundamental economic data in the past couple of weeks in the aftermath of the over-the-top cheerleading on the major nightly news shows that the economy is showing new signs of life.
The Commerce Department reports that consumer spending fell 0.2 percent in April for the first time in nearly a year. Battered by higher taxes (including this year’s hike in the Social Security payroll tax) and high gasoline prices, consumers have pulled back. Not a good sign.
Mr. Obama continues to claim that manufacturing is back as a result of his policies, but manufacturing output fell to its lowest level in four years in May, according to the Institute for Supply Management’s manufacturing index, which fell from 50.7 in April to 49 last month. “We definitely have seen some softness in the economic data for manufacturing over the last few months,” Chad Moutray, chief economist for the National Association of Manufacturers, told The Washington Post this week.
Workers are getting squeezed. Hourly pay scales for those who do not work on farms dropped at a 3.8 percent annualized rate in the first three months of this year, the Bureau of Labor Statistics reported this week. Hourly pay has risen by 2 percent annually on average over the past four years. That’s “the weakest four-year stretch on record,” writes economic analyst Mark Gongloff on the Huffington Post website. Overall, weekly wages have been flat.
Payroll provider ADP reported this week that U.S. businesses added just 135,000 jobs in May, well below the 165,000 jobs created in April. Notably, the private survey firm found that manufacturers lost 6,000 jobs last month. If Friday’s Bureau of Labor Statistics job report comes in anywhere near this range, it will be an unimpeachable sign that the economy is slowing down dramatically once again.
Some analysts insist this downturn is in large part because of government spending cuts, but a meager $85 billion in sequestration cuts isn’t seriously hurting a nearly $17 trillion economy. This is the result of anti-growth, anti-job tax rates, regulations, energy and trade policies.
Don’t look for a dramatic change in the Obama economy anytime soon, if ever. The president and his party seem perfectly comfortable with his policies and see no reason to change them now.
Donald Lambro is a syndicated columnist and contributor to The Washington Times.