Dec
5
Watch Out
As the Christmas month begins, signs tell us that the road will be rougher.
Although the job losses slowed down, we still have to wait for sufficient job creation for recovery could take place. However, firms are delaying employing workers until they are confident enough of recovery. So, what should we really hold our fire for? Shouldn’t we start instilling security for firms to be assured of investing in our own human capital or let them hang on for those signals?
Subsequently, let us look at the housing sector sluggish progress. The prices of home, which serves as a gauge of consumers’ wealth and the financial sector’s overall stability, have started to become stable owing to Recovery Act’s homebuyer tax credit that increased sales. If home price increases, consumers will have to source out funds to avail houses consequently, increasing portfolio value of real estate that would later on mitigate banks to lend. In addition, home foreclosures have dropped slightly.
Prices should be guarded for clues of deflationary period as this would head to job loss and declining salaries. The massive government spending through bailouts and stimulus package could be felt in unmanageable inflation if the economy recovers without reining in the spending.
The manufacturing sector, after contraction in 17 months, has grown for the last three months. Nevertheless, factories are still operating below average capacity. As a consequence, before the manufacturers could employ additional employees they have to maximize first the remaining idle capacity.
The economy has experienced four straight quarters a recession. Nonetheless, the contraction of 3.7% had brought back the economical situation to positive growth in the last three months. The government stimulus programs such as Cash for Clunkers played a significant role in economic expansion. Though, we still have to watch out for the sensitivity of economy towards recovery in contrast to what the GDP may suggest.