An apparent gap exists among different economic indicators as to the state of the recovery. Surveys of 
consumer sentiment and home builders both indicated significant improvement in recent weeks. Economists and markets quickly pointed to these surveys as evidence that the economy is nearing the bottom.
Consumer confidence and GDP
These reports though were followed by hard data that were contrary to the surveys. For Consumer Confidence the better-than-expected improvement was countered by a worse than expected drop in Gross Domestic Product and lower Retail Sales figures. These in addition to continuing high unemployment figures.
Builder sentiment and housing starts
This Monday we were encouraged by reports of increased enthusiasm from home builders. The Federal Reserve responded to this and other positive reports to offer cautious optimism that the economy is mending - really an affirmation of the administrations stimulus program.
Today though, we are met with hard data again running counter, with the report that housing starts were down. Part of that data does include improvement in single family housing starts, which could very well be indicative of a turn around.
Sentiment and actual data
It seems as sentiment and confidence surveys are reflecting hopes that the economy is turning, but do those hopes match economic reality? With unemployment still growing and with many of the lost jobs seemingly permanent losses, can the economic recovery be sustained on improving sentiment? Can sentiment continue to improve if the hard economic numbers do not show some consistent improvement?
Recovery plan focused on financial markets
The focus of the stimulus package seems to be to ensure stability in the financial markets, providing massive bailouts with few requirements to large banks. Unemployment is rising. Thirty three smaller banks have closed, with more coming. The major automotive manufacturers are closing plants and dealerships. Even the financial industry is suffering job losses, with American Express announcing cutbacks today.
Today the Federal Reserve announced that money will be available in July to encourage commercial lending. Additional emphasis on finance.
Hope for a recovery is based on encouraging lending, by strengthening banks. We are moving towards big government and big banks. So far efforts to stem foreclosure, to save jobs, to hold on to automotive manufacturing have either not been successful or have been primary. We seem to be conceding that employment loss will continue.
Will the big banks and big government be able to rescue the economy? Is this the right course?
Richard, thanks. I really appreciate these types of posts.
As for commercial lending: I have to wait until July. I could use some NOW!
Hi Richard, Good post. Thanks for sharing.
Best - Sash
Good post. The stock market is affected by economic news on a day to day basis and these days it is indirectly affecting real estate.
Good post.
Building on your post, many realtors like to operate on sentiment and emotion rather than facts.
President Obama's promised many good things like 3-5 million new jobs. Beginning with shovel-ready projects that would instantly put people back to work. His housing stimulus package was to save as many as 9 million from losing their homes. At last count the number saved was 9.
Greed got us into this mess with the banks lending money and not following good business principals then selling their mortgages for profit. Wall Street's greed packaged these toxic mortgages and sold them for profit.
President Obama and the Congress still don't get it. Fix housing first and the rest will follow.
Richard, thanks for the post. I truly hope the current recovery programs work. Though, I have been less than impressed by the financial sectors (banks and wall street) handling of their finances and gifts.
It is amazing that the very people that created this mess are the same idiots and greedy buggers that need to "rescue" us and we pay and pay and pay. I just want to know when they all go to jail and lose their homes and everything else they have(big banks). We can't survive with or without them. How about water boarding for these executives? They all knew. They have stated that. It's amazing.
Enthusiasm??
Confidence???
Since when did "feelings" become a measurement of economic strength???
This is "feel good politics" at the lowest level. Tell the public what they want to hear and the ignorant masses will stay quiet.
In the mean time, give the money to the banks that send money to our PACs and keep us in office.
Do you remember how a mime uses his hand to go up and down his mouth and changes expression everytime he moves over it? Happy and sad, happy and sad, etc. I feel that way every morning I turn on CNBC to see economic reports. At least it is good exercise for facial expression practice.
Richard: Good post and very true. What that means is we're still a ways away from recovery. The consumer is still cautious and banks are in bad shape. Only time will heal what has become a financial nightmare for many Americans! Thanks!
Thanks for the post Richard. It appears that the government is trying to do a bit of "misdirection" with these positive reports, and they frequently cloud bad news with the phrase, "better than expected." The cold, hard facts seem to give us the truth, but few really understand how to make sense of it all, and can only "hope" that the govt's efforts will work.
Andrew,
Thank you for your generous comment.
Richard
Sash and Gita,
It is getting hard to know what to look at. Are we coming out or not. Hard to judge.
Richard
Jim,
I know that there are many things occupying the President's agenda. But with the economy I just am concerned that our approach is focusing on the top. That is where the problem started, but I think the solution needs to start at the bottom.
Housing and jobs.
My thoughts.
Richard
Gabe,
The recovery package is the stimulus package. It is slowly being implemented. The push has always been to rush money to the banks, and to trickle the stimulus money.
I think when the recovery takes place there will be plenty of credit taken, but I think none deserved.
Richard
Linda,
Agree. I do not understand the retention pay is needed for the same people who drove us to this point.
I would fire them, not retain them.
Richard
Lenn,
I think your post makes the point so much better than mine.
Thanks,
Richard
Joe
The reports are hard to track. But the economists are looking hard and close for positive data.
Richard
Paul,
I agree. We seem to be a ways from recovery.I cannot but help to think of all the lost jobs. 600k new clsims each week.
New announcements almost daily. How can the economy recover? How can housing recover? With lost jobs, lost buyers, worsening credit profiles.
We are spending trilliions of dollars to rescue the banks.
Man.
Richard
John,
Don't know if it is planned misdirection with the reports, but it is looking at the cup as half full - regardless of the level in it.
Richard
Richard,
I think a lot of this consumer confidence has to do with the fact that the stock market has rallied of off its lows. Unfortunately the stock market is no longer an economic indicator and as such I don't subscribe to it or the fact that confidence is coming back. This is in my opinion a sucker's rally. The fundamentals are no better today than they were six or nine months ago.
On another note, I tend to agree with John Mulkey about his opinion. A good example is the monthly job loss report. For the past several months the government has consistently been underestimating the number of monthly job losses only to "revise" the number higher a month later:
Initial / Revised
Oct 2008: 240K / 380K
Nov 2008: 533K / 597K
Dec 2008: 524K / 681K
Jan 2009: 598K / 741K
Feb 2009: 651K / 681K
Mar 2009: 663K / 699K
If I go out and Max out my Credit Card tomorrow... I might feel pretty good with all of the cool stuff I bought with the money I got to spend... but reality will set in when the bill comes in...
Sorry... I just have to shake my head when people think that the money being spent is money the Government has. It's just debt with some freshly printed money thrown in...
Tax Revenues are WAY down and going even lower as Spending has Skyrocketed... Personal Finance 101 with what eventually happens.
Just ask California...
I like to read your posts Richard and agree consumer sentiment may be up on the last couple of months on Wall Street and economists looking for improvement wherever they can find it.
To boost our economy we need to start at the bottom as you say with improvement in employment which in turn will lift the housing market.
Kent Davis
Only the American People can save this economy and country. To do that the American People need the freedom to act. In this I mean we need to cut taxes, lower barriers to small business, cut government, let big banks and big business take their lumps along with the rest of Americans. It was not regulation or lack of regulation that caused this problem so much as manipulation of the regulation for politics and insider deals.
A thoughtful post Richard. Big government has never been the answer to revive a moribund economy. FDR attempted it in the 1930s. The current administration is making the same mistake. Washington now manages Detroit's auto manufacturers as seen by the increasing number of profitable dealerships being forced out of business. I keep telling myself, "This too shall pass."
I think Lenn and Jim hit the nail on the head...they just don't get it!