It turns out the boogeyman lurking in the economic shadows may in fact be a...toy poodle. A story in today's Washington Post notes that, while some consumer prices are up (gas, food), the U.S. economy is humming along nicely. Unemployment isn't what it was during previous recessions (and it's debatable whether we're even in a recession), and our gross domestic product, while not exactly buff, is at least fairly robust.
So, what gives? Why are folks scared? And to bring it closer to this forum, why are we not buying and selling houses? (OK, I know part of the answer: can someone say mortgage crisis?).
Anyway, here's part of the Post's story...
"Ask Americans how the economy is doing, and their answer is stark: It is not just bad, it is run-for-the-hills terrible. Consumer confidence is at its lowest level in almost 30 years. Only 12 percent of Americans think the economy is in good shape. On the Internet, comparisons to the Great Depression are widespread.
But the reality is different. According to most broad measures of how the economy is doing, it's not all that grim.
Soft? You betcha. In recession? Quite possibly. And a crisis in the financial markets has rattled nerves for months now. But so far, the economy is holding up better than it did during the last two recessions in 1990 and 2001. Employers haven't shed as many jobs, the unemployment rate is still relatively low, and gross domestic product has kept rising. Things are nowhere near as bad as they were in the Great Depression, or even during the severe recession of 1982-83. The last time consumers were this miserable, in May 1980, the jobless rate was 7.5 percent and inflation was 14.4 percent. Now those numbers are 5.5 percent and 4.2 percent respectively.
This paradox has created a unique challenge for those guiding the economy, who worry that Americans' pessimistic views will become a self-fulfilling prophecy. Two-thirds of the economy is consumer spending. So if people's negative outlook leads them to cut their spending, a steeper downturn could happen."