Despite a slowing economy and record job losses in recent months, economic reports released Friday suggest the worst of the U.S. recession may be over.
The U.S. government reports new home sales were up sharply in November. The Commerce Department says new home sales increased six percent, the largest monthly advance since December 2000. The figures were stronger than expected and reflect the benefits of the steady and substantial decline in interest rates over the past 12 months. Most home purchases in the United States are financed with 15 or 30 year mortgage loans and the housing market is particularly sensitive to changes in interest rates.
And consumer confidence rose for the first time in six months in December, posting its biggest gain in nearly four years. The New York-based Conference Board says the deterioration in economic conditions that took hold last March may be easing. The report says consumers short-term confidence is no longer at recession levels as many buyers believe the economy may be close to bottoming out and that a rebound is likely early in the new year.
Bernie Markstein, a financial adviser in suburban Philadelphia, believes the economy is set to resume significant growth in the first quarter of 2002. But he says unemployment needs to stop rising before consumer spending makes strong gains. "When you look at the unemployment rate you see an unemployment rate of about five percent. Which means that 95 per cent of the people are still working," he says. "The problem is when a large percentage of the 95 percent fear they're going to lose their jobs. I think we're at the stage now where that fear is subsiding and people are more willing to come out and spend."
But overall, hard times are the order of the day. The economy is still in its first recession after 10 years of steady growth and prosperity. Nearly two million jobs were cut in 2001 from an economy that had been characterized by labor shortages and job creation. Corporate earnings have evaporated and the stock market is down for the second year in a row. Bankruptcies and a weaker stock market have significantly reduced the financial assets and retirement earnings of millions of Americans.