Happy Days Are Here Again?

May 29, 2013 at 8:07 am Leave a comment

imagesYesterday was a banner day for the glass half full crowd when it comes to the economy.  The papers are prominently featuring articles this morning reporting that the influential S&P/Case-Shiller Home Prices Indices reported double-digit increases in housing prices in the first quarter.  Some of the areas worst hit by the downturn had their largest gains in more than seven years.  This is the surest sign yet that the housing market, for better or worse the lynchpin of economic growth in this country, is gaining momentum.

A second dose of good news was that consumer confidence is also bouncing back.  According to the Conference Board Consumer Confidence Index, consumer confidence now stands at a five-year high at 76.2%, up from 69% in April.  More important than the overall number is that the poll’s internal numbers are also improving.  For example, the number of people saying business is good increased to 18.8% from 17.5%.  In addition, people were generally more optimistic about the labor market with more people expecting the job market to improve in the coming months.  By some estimates, up to 70% of the American economy is driven by consumer spending.  So, this can only be good news for our economy.  Plus, the stock market reacted to the news by reaching new record highs in a classic example of an economic feedback loop.

Still, there’s more than enough for the glass is half empty crowd, which will keep us all guessing for the next several months.  First, Case-Shiller reports that at least some of the housing improvement reflects the winding down of foreclosed property.  Second, just as New York never experienced the worst of the economic slowdown, housing prices are making their slowest climb in the Northeast.  And let’s not forget that we still have historically high numbers of long-term unemployed.  Plus, bond yields are beginning to rise.  The ten-year treasuries hit their highest yields in thirteen months, which for many credit unions is good news but is sure to make those regulators on edge about interest rate risk that much edgier.

And then there’s Washington.  Sensible people like the Board of Governors at the Federal Reserve will agonize over whether the latest signs of economic growth should expedite the FED’s timeline for pulling back on its $85 billion monthly purchase of mortgage-backed securities and government bonds.  In contrast, for the ideological extremists dominating Congress, this latest economic data will be seized on as proof certain that Government spending cutbacks haven’t hurt the economy and that even more should be done to reduce our budget deficit.

Expect more brinksmanship starting in September as we come closer to a drop dead date for once again raising the nation’s debt ceiling.

Entry filed under: Economy, General, New York State. Tags: , , , , .

You’ve Got To Be In It To Win It? To Levy Or Not To Levy, That Is The Question.

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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