by Ingo Winzer
Yes, the economy keeps improving; but yes, it's only doing that slowly. Retail sales in May were up 8 percent over last year. But 2 percent was due to higher gasoline prices, and after adjusting for inflation the real increase in sales was only 2.5 percent, pretty anemic. Retail jobs increased 1 percent, in line with the modest volume gain. Overall, jobs in May were up 0.7 percent. That's not bad, considering that annual job gains back in the heydays of 2004 and 2005 were only 1.8 percent, but it's not very good if you want work for the 5 million people who lost their job in the recession and still haven't found a new one.
Consumers keep digesting the mountain of debt they loaded up on before the recession. They won't buy stuff until their credit card balances again seem manageable. When will that be? Consumer debt is down 12 percent since the 2008 peak and falling a third of a percent each month. In the last big recession, 20 years ago, consumer debt fell 14 percent before spending resumed. So we might have another year of sluggish growth ahead of us. The economic problem is complicated by the wars in Iraq and Afghanistan, which we paid for by borrowing big bucks from China.
In other circumstances, the government could goose the economy with tax cuts or direct spending, but by doubling US debt in the last 10 years -- to $14 trillion -- we can't afford to do either.
Ingo Winzer is president of Local Market Monitor, and has analyzed real estate markets for more than 20 years. His views on real estate markets are often quoted in the national press and, in 2005, he warned that many housing markets were dangerously over-priced. Previously, Ingo was a founder and Executive Vice President of First Research, an industry research company that was acquired by Dun and Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in Finance from Boston University. He resides in Cambridge, Massachusetts. The boldface passages were chosen by Mr. Winzer.
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