A Spotty Recovery

http://www.nytimes.com/interactive/2012/02/10/business/economy/off-the-charts-private-sector-leads-recovery.html?ref=economy

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"The first responsibility of a leader is to define reality." (Max DePree - Chairman of the Board, Herman Miller, Inc.)

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In a speech Thursday to the National Association of Home Builders, Ben Bernanke said that declines in home prices have forced many Americans to cut back sharply on spending and warned that the trend could weigh on the economy for years.

Bernanke said the broader economy won't fully recover until the depressed housing market turns around: "People are spending less because they are stuck in 'underwater' homes, which are worth less than they owe on their mortgage."

If you look at the components of GDP growth as it has occurred since June, 2009, the trend lines (article attached) show personal consumption up (but not enough) and government spending down (too much). The U.S. needs and needed infrastructure spending and hasn't been getting enough. Not only does the U.S. "need" new bridges and roads (for example), but Mark Zandi (and others) have been telling Congress and the Obama administration that infrastructure spending has the best ratio for job creation (dollars spent to jobs created: 1/1.5).

Residential investment has been abysmal - see Bernanke's comments above. Private sector investment has been up but "sectorized." That's proven by the all time record level of cash on the books of Top 500 companies. And, "jobs" are net "up" in the private sector while they are net "down" in the government sector. Right now, that's a "push."

Again, my truck with economists is that (looking at these trend lines) the "total jobs" trend line did not start back up again until 18 to 21 months into the recovery as "they" define it: from June, 2009. It's not a "recovery" until jobs start back up again (so, that would be June 2011) and a recovery doesn't continue without investment.

Nouriel Roubini's perspective as recently as Davos (January, 2012) is that the U.S. economy will be at "stall speed" for 2012 (in the 1% neighborhood for GDP growth). Bernanke's Fed has "announced" that they will keep interest rates where they are until 2014. Do you think the Fed has done that because they see a roaring recovery going on?

Those who have some experience with the housing market see the possibility of a comeback in prices as early as 2014. So, until then...