Housing Drops, Stock Markets Slide

According to the report issued yesterday, existing home sales in July dropped by a record 27.2%. This caused the stock markets to slide. The DOW dropped briefly below 10,000, to close 134 points below opening.
http://noir.bloomberg.com/apps/news?pid=20601087&sid=akkTzy2cnfN4&pos=1

Stocks tumbled, the 10-year Treasury yield fell to the lowest in 17 months and the yen surged to the highest versus the dollar since 1995 as a record plunge in home sales stoked concern the economy may relapse into a recession. Oil fell below $72 a barrel.

Sales of existing homes plummeted 27.2 percent to a 3.83 million annual rate, the National Association of Realtors said in Washington, the lowest in a decade and worse than the most pessimistic forecast of economists surveyed by Bloomberg News.

This doesn't bode well, but it is logical. As long as we keep hemorrhaging jobs, house sales will continue to drop.

“This is yet one more piece of disappointing economic news,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “Irrespective of whether there’s a double dip, jobs aren’t being created. Without jobs they’re not going to get better numbers on housing.”

As Neil Irwin recognizes, all of this bad economic news is pointing in one direction... and it's not the direction we want. Our economy is getting worse. Quickly.
http://voices.washingtonpost.com/political-economy/2010/08/the_recovery_is_losing_steam_f.html?hpid=topnews

There's a pattern here, and it's not a good one. Virtually every major economic indicator to come out in the past two months has been disappointing in one way or another. Retail sales. International trade. Weekly jobless claims. The monthly employment report. Housing starts.

In fact, of the major data releases, the only one I can think of that has been decent over the past couple of months was last week's industrial production report.

When the economic data first started turning soft earlier in the summer and it looked as though the recovery could be losing steam, I tried not to leap too far into major conclusions. Data is often uneven at economic turning points, and economic recoveries sometimes move in fits and starts.

But as the third straight month of weaker data comes to a close, the brutal reality is that all the indicators are pointing in one direction. The data are all either coming in in line with diminished expectations, or surprising in a negative direction. It's not an uneven recovery-- it's not much of a recovery at all.

In my opinion, and it's an opinion that I've shared many times before, one major stumbling block to recovery is our government. PresBo and his Congressional cronies are putting up economic roadblocks with their tax increases, new regulations, and massive new government entitlement programs.

In addition to that, they are continuing the same policies that played a major part in the original housing collapse. One major problem was that too many people got mortgages who couldn't afford them. Fannie and Freddie played a big part in this. Current government policy isn't turning away from this practice, they're doubling down on it by bailing out those who can't afford their payments and by encouraging easier lending criteria for home mortgages.

We can't improve things by repeating the same mistakes that caused our problems in the first place. But that's exactly what our government is doing.

The combination of these mistakes is squashing any hope that our economy may head into recovery, and is instead leading us downwards, possibly into another recession. Or worse.