What Recovery?

I find it fascinating how government agencies such as the Commerce Department fudges numbers for media consumption. They put out projected numbers that are usually rosy and then revise them downward after the media has forgotten about them. Somehow we’ve gone from a 3rd quarter figure of 3.5% growth to 2.8%  to 2.2% in three months!

Captain Ed has a great dissection of the announcement and explains how even the 2.2% is inflated by the Cash for Clunkers and new home owners tax credit stunts. Without those the growth was 0.7% and I have to wonder if even that happened. I don’t think things can be hidden forever when people are losing jobs and pay raises. 

Then there are the disastrous home sales figures that came out today.  A rise of 6.2% in sales was expected for November. Instead, they fell 11.3%.  I think this is the quote of the article:

November’s performance was a “hangover from the tax-credit-induced binge in the July thru October period," Peter Boockvar, market strategist at Miller Tabak, wrote in a note.

I think both ugly figures show the perils of government based stimulus efforts.  All the Feds can do is create a short term artificial bounce and that obscures the systemic problems at the core.  It looks good politically and might even get a country through a small recession, but it does nothing to solve the underlying weaknesses.  In this case, it may have done more harm by generating false expectations -- if not more credit bubbles.

Adding to the problem is the way the media portrays sales as increasing by only talking about month to month sales.  Comparing sales by year to year in the same period, things are not good.  Even the anemic 1.3% growth for November sales is from October.  This Gallup survey says holiday spending is actually down 22% from 2008, which was considered a very bad year. If the consumer is all we have to pull us out of the recession, we are in very bad trouble.

It seems we have a great many proverbial Nero’s fiddling while the American economy burns.  Bluntly, it probably already too late to do anything.  We are in for another major fall in 2010.