The NAR Housing Affordability Index compares housing prices to consumer incomes and mortgage rates. After the bubble burst, reductions in both prices and rates led to record affordability despite shrinking incomes. Unfortunately, this “housing recovery” never became sustainable, because incomes remain stagnant.
Consumers simply do not possess the money to drive the market further, and investors have begun reducing their speculative activity. Over the next few months, Bernanke’s Housing Bubble will meet a similar fate to Greenspan’s.
The number of job openings fluctuates, so one bad month should not be a cause for concern. What is troubling is that job openings, after surging from late 2009 into early 2012, have leveled off since then as indicated by the arrow. Since 2012, the number has ranged between 3.6-3.9 million, which is way below the historical numbers of a smaller U.S.
The lack of labor demand leads inevitably to stagnant wages suppressing economic growth indefinitely. Consumer spending accounts for 70% of the U.S. economy. If this component stagnates, it is impossible for the other 30% to fill this hole. The New Normal endures.
The WSJ’s headline is misleading. Greece is close to a “primary” surplus. What is a primary surplus? It means that the Greek Government is able to pay for its expenses minus debt payments from its revenues. Commentators cheerleading Eurozone like to tout Greece’s reaching this step, but it is an illusory accomplishment.
The primary surplus ignores the problem of too much debt. Let’s say you and your neighbor are in primary surplus (i.e. both of you earn enough money to pay all of your monthly expenses); however, you do not have a mortage or a car payment, and he has both. As you can see, while each of you are in primary surplus, by virtue of your lack of debt, you are in much better financial shape than your neighbor.
Ignoring Greece’s 157% of GDP debt pile is pure fantasy and so is its primary surplus. The reason Greece is in trouble for the next decade is its crippling debt level. The primary surplus blithely ignores the most important factor influencing Greece’s economic health.
Don’t worry too much about the Greeks. Most of that debt will never be paid off, but they will remain in this bailout program as long as the Germans keep out the checkbook.
Spain is probably in worse economic shape than Italy. Spain is still enduring the aftershock of its burst housing bubble, while Italy merely suffers from malaise. Italy’s problem today is that the governing coalition is getting shakier by the day. Letta’s party is trying to end Berlusconi’s political career. In return, Berlusconi’s allies are threatening to bring down the government if any moves are made against their leader. Brinkmanship has replaced compromise to the detriment of the Italian people, but expect a last minute solution to the problem saving the government and Italian bonds at the last possible minute.