Maybe Phil Gramm was right after all.
The former Texas senator and ex-economic adviser to Republican presidential candidate John McCain caught flack a few months back for calling US consumers “a nation of whiners” when it came to their outlook on the economy. But it turns out Gramm might have been on to something.
While there is no denying that a swooning housing market, high gas prices, a wheezing auto industry and Wall Street’s crippling credit crunch are taking their toll on the American economy – and Americans’ psyches – experts say the perception might be far worse than the reality.
“When you start to see the mainstream media come on and say recession, depression, recession, depression, and doing this over and over, it starts to scare people,” said Richard Yamarone, chief economist for Argus Research in Manhattan.
“Using a car analogy for the economy, everyone wants to run at 65 mph or faster [but] I think we’re moving [at] more like a 40 mph pace,” he said. “It is definitely below what anyone would like, but it is not in the broken-down lane either.”
Of course, consumers aren’t imagining that the economy is worse off today than it was a year ago. Home sales and real wages are down, while inflation and foreclosures have risen, the latter to a 29-year high, according to the Mortgage Bankers Association.
And according to figures released just Friday, the nation’s unemployment rate reached a five-year high of 6.1 percent, from 5.7 percent in July and 4.7 percent in August 2007.
“All the metrics except GDP [gross domestic product] are bad,” said Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business, “Second-quarter GDP was growth on steroids, it was not real because of the stimulus package.”
He says Americans are worse off today than a year ago because home prices are lower, foreclosures are up, sales are down and there’s an excess of supply of homes.
“Builders cannot get rid of the McMansions, like Chevy cannot get rid of the Tahoes [SUVs],” he said. “It is lot harder to discount a McMansion than a Tahoe.”
The murky jobs picture doesn’t help. Another economist said that month after month of job losses and inflationary pressures tells him that Americans are slightly worse off than a year ago. But he adds we have talked ourselves into some really bad times.
Locally, the picture is also mixed. While foreclosures are up sharply from a year ago, and home values in the city have fallen, the pain has been less severe in the city. And unemployment, despite all the Wall-Street layoffs, is actually down from 2007 levels.
Yamarone points out that while there have been more job losses than anyone would like to admit, the US is not heading toward a recession, even with foreclosures and consumer credit up.
The million-dollar question, of course, is when Americans will begin to see things improve.
Economists say the key to an economic recovery will be when financial institutions and banks, which are in the business of making and collecting deposits and lending money, are in better financial shape. That is expected sometime next year.
“For many years we lacked common sense in the way business was conducted,” said Maria Fiorini Ramirez, president and CEO of economic firm MFR Inc. in Midtown. “You can legislate as much as you want but you cannot legislate common sense.”