Wednesday, August 25, 2010
Sales of existing homes are occurring at their lowest rate in fifteen years and employers aren't hiring. Why? Because making such big financial commitments when one has no rational basis for expecting to meet the obligations that come with them makes no sense.
The housing market is ... being hampered by the weakening economic recovery [sic]. Unemployment remains stuck at 9.5 percent and many potential buyers worry they might not have a job to pay the mortgage.On top of that, there's concern that the financial outlay associated with a home purchase made today will prove unrealistically high tomorrow.
One reason the market is hurting is that buyers and sellers are in a standoff over prices. Many sellers are reluctant to lower their prices. And buyers are hesitating because they think home prices haven't bottomed out.This situation parallels the one employers face when considering whether to buy the services of a new employee, as outlined by John Stossel.
The problem today is that the economy is not being left alone. Instead, it is haunted by uncertainty on a hundred fronts. When rules are unintelligible and unpredictable, when new workers are potential threats because of Labor Department regulations, businesses have little confidence to hire. President Obama's vaunted legislative record not only left entrepreneurs with the burden of bigger government, it also makes it impossible for them to accurately estimate the new burden.With myriad new regulations which will affect the price of labor and "no fewer than 243 new formal rule-makings by 11 different federal agencies" hanging over the financial sector, employers are hesitant to buy and their willing, potential new hires sit around unused. The only difference here is that the direction the buyer fears his price will go.
We really need to start shrinking the size of the welfare state, but even just maintaining the status quo (if that were even possible) for some time would be an improvement over our current situation in one sense: It would allow businessmen to figure out what the hell is going on.
An economist made headlines yesterday, not so much for laying all this out, but for calling a spade a spade: He said that our economy is in a depression. I completely agree.
If, as the saying goes, "Admitting the problem is half the battle," this is the best news about the economy I've heard in years.
Today: Minor edits.