Is the recovery of the United States economy really a dead cat bounce or false in nature? Recently at a Northeast Farm Credit staff conference, I had the opportunity to listen to one of the senior economists from Economy.com. While the economy has many strong attributes, i.e. increased corporate profits, productivity gains, equity market increases and strong housing prices, he warned us of possible storm clouds.
A large share of the GDP growth in recent months has come through home equity financing, or draining equity from the home and turning it to cash. Nearly two-thirds of GDP gains have been the result of home equity financing.
This has been one of the few economic recourses that has not had job growth. The reason for this is that technology is replacing many jobs in the manufacturing and white-collar sector. Secondly, many jobs are going overseas because of cheaper wages. Another factor is that the existing workforce is working extra hours or overtime to make up the needed worker requirements. He indicated that if you have a job, you are okay, but if not, OUCH!
Finally, he said it’s only a matter of time before interest rates increase because of our ballooning federal deficit. This, in turn, could put downward pressure on real estate and possibly the equity markets.
This week I’ll be heading out to the West Coast for several days.
The football season is going full force. Who is going to stop Oklahoma? They are getting too hot too fast!
My e-mail address is:[email protected]
Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.
To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.
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