It's not as if the housing slowdown isn't hurting the economy; it certainly is.
Real-estate investment is way down, as is the amount of money people are pulling from their homes. (Numbers from the Federal Reserve and Goldman Sachs show that "active" mortgage equity withdrawalsthe total sum of money from cash-out refinancing and home equity borrowing that might be used for discretionary spendingstand at $368 billion, down 25 percent over the past year.)
But as yesterday's stellar retail sales numberssoaring 1.0 percent in Novembershow, consumers continue to spend, spend, spend. And why shouldn't they? Real hourly wages are up nearly 3 percent in the past year, and real disposable personal income grew a solid 0.6 percent in October. And this five-year economic expansion continues to produce oodles of jobs, an average of 138,000 a month since April. (Actually, a bit north of 200,000 if one considers potential upcoming Labor Department revisions to the payroll numbers.)
And for all the talk of falling house prices, economist Ed Yardeni notes that "the value of our homes has doubled since the beginning of this decade. So we are not rattled by those alarmist headlines that home prices are down a record 3.5 percent year over year." Plus, stocks continue to raise the value of portfolios.
Wall Street economists and the Federal Reserve members have been "data dependent" all year, poring over every available economic statistic for some clue on the direction of the economy. (The housing bust and volatile energy prices have pretty much melted their fancy computer models.) But as one firm put it, the retail sales report was a "game changer" in that it swung the burden of proof to the bears, a group that claims the housing slowdown will eventually drag the economy into recessionor something close to it.
For the optimistsnot to mention average Americansit looks to be a happy Christmas, indeed.
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