Let’s get right down to business. August will be all about economic recovery, or at least about reading the tea leaves for signs of it.
Already a majority of economists polled by The Wall Street Journal believe the recession is over, and just this week the Federal Reserve indicated it also sees the recession coming to an end—the Fed held interest rates steady and close to nothing, meaning it’s still very inexpensive for banks to borrow money from the U.S. government.
But the Fed also said it’s going to start backing off one of the recovery programs it instituted to help get the economy in better shape, which many viewed as a positive sign about what it thinks about the economy.
Earlier news that home prices rose in July had many calling a housing bottom, meaning that prices had likely found a floor (they’re off about 30% since the peak). And the “cash for clunkers” program helped push July car sales to their first year-over-year improvement since April 2008.
Certainly the stock market is happier too, the Dow is up 45% since its March lows.
So is it all roses and full steam ahead?
First, just after all the exclaiming that the recession is over, the government reported that consumers spent less at stores in July, surprising economists who expected an increase. Even otherwise recession-proof Wal-Mart saw sales drop. Simply put, consumers aren’t buying much more than what they really need. This is bad because if people aren’t buying then businesses aren’t making money or placing orders for new products or parts and that hurts manufacturers and so on and so on.
Then we learned that more homes were foreclosed on in July than a year ago—up 32%. This isn’t good news because foreclosures drag down overall home prices (they sell at a discount), and it could mean that home prices have further to fall.
And finally, more people filed for first-time unemployment benefits in July, a bad sign because if people aren’t making money then they aren’t spending money.
The big picture
Poor August. Slate’s running a campaign to get rid of the month all together due to a host of reasons including heat, and Time Magazine calls it a dangerous month in New York because everyone’s therapist is on vacation. But with the economic data giving mixed signals, August 2009 could be the make or break month. If it’s good we’ll hear cheers for a confirmed path to recovery. If it’s bad, we’ll probably hear more cries for another stimulus package come September. We’ll just have to wait and see.
Speaking of September, the WeeklyDIVA will be back after school starts with a fresh look and new material. See you then.
