"Industry Speeds Recovery, And Housing Slows It Down," "Weak Economic Indicators Bolster Precious Metals" and "Consumer Confidence Tumbles In June" are just some of the many headlines emerging in the latter part of the month that help reflect the current economic situation.

IN PICTURES: 10 Tips For The Successful Long-Term Investor

The past few months have seen strong improvements in housing, outlook and retail sales indicators, while employment figures remained at recession lows. Such a pattern of "economic progress" during a period of massive unemployment is simply unsustainable and unrealistic. Either the unemployment rate would have to improve or the growth in the aforementioned indicators would have to slow down to achieve a level of balance. Unfortunately, as observed in the last two weeks, the latter situation prevailed.

Index This Month Last Month Last Year Monthly Change Annual Change
Housing Starts * 593 659 550 -10.02% 7.82%
Existing Housing Sales * 5660 5790 4750 -2.25% 19.16%
Housing Prices * 179.6 172.3 174.8 4.24% 2.75%
Unemployment Rate 9.70% 9.90% 9.40% -2.02% 3.19%
Half Year Unemployment * 6763 6716 4030 0.70% 67.82%
Initial Jobless Claims * 476 460 613 3.48% -24.96%
Business Outlook *** 8 21.4 -5 -16.24% 23.97%
Consumer Confidence 52.9 63.6 49.3 -16.82% 7.30%
Retail Sales ** 362.5 366.9 339.1 -1.20% 6.90%
Car Sales ** 55.5 56.4 49.3 -1.60% 12.58%
S&P 500 Index 1041 1089 919.32 -4.41% 13.24%
*Thousand **Billion ***Adjusted for mean and standard deviation

Stifled growth forecasts for China, in addition to the numerous negative economic indicators, caused the market to recede as a wave of panic spread through Wall Street and Main Street. The S&P 500 drew back by 4.42% through June. The European budget concerns and the BP oil spill continue to remain great sources of future uncertainty, and more internal problems have emerged.

Housing

Not surprisingly, after termination of the federal government home buyer tax incentives, the housing market tumbled due to a rapid decrease in demand. Housing starts decreased by 10% on a month-over-month basis, still showing improvement over last year's data. Likewise, existing housing sales declined from 5.79 million to 5.66 million, and new building permits faced a near 6% drop-off.

Throughout 2010, the government made a solid effort to artificially improve the housing industry. Home builders were given preferential tax treatment, incentives were provided to home buyers and attempts were made to reduce foreclosures. Although the intentions were noble, the market could not be inflated indefinitely, and eventually it began its reversion to required levels.

Employment

While all indicators of interest showed negative movement, employment was actually mixed - the unemployment rate decreased from 9.9% to 9.7%. Even before accounting for statistical error in the Bureau of Labor Statistics Employee Situation Report, the suggested improvement is marginal at best. Practically one in 10 Americans are still out of work. (From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone in our Macroeconomic Analysis.)

Furthermore, this statistic can be somewhat misleading because unemployment is typically calculated by the number of job seekers who are unable to find work. Those who are frustrated with not having a job for an excessive time period may simply remove themselves from the labor force; the number of individuals who have been unemployed for over half a year increased by 0.7%.

Business

The diffusion index, a leading indicator that measures expected industry growth, decreased from 21.4 to 8, the lowest level in eight months. Since the index remains above zero, the manufacturing sector is still expected to expand, but at a much slower pace than in previous periods. Out of the companies questioned for the Business Outlook Survey, the Federal Reserve Bank of Philadelphia notes that 18% of firms decreased their number of employees while 17% had employment increases.

The Consumer Confidence Index shrank by 16.82% and now hovers around the same area where it stood at this time last year. Consumer confidence is a major market driver; when the decrease was released, it helped push the stock market 3% into the red.

Outlook

Poor month-over-month economic performance should not come as a complete surprise, given that the unemployment rate remains at nearly 10% and government incentive programs were terminated. Full and sustainable recovery requires that consumers have the necessary funds to fuel economic expansion; government funding cannot achieve this task independently. In addition to decreased housing activity, retail and car sales retracted by 1.2% and 1.6%, respectively. Unemployed people simply cannot buy houses and cars.

Since employment figures are not expected to make a complete turnaround within the next month, the economy can experience a further pullback in the upcoming summer months. Although June's Existing Home Sales report noted a 4% increase in May housing prices, this trend is unlikely to continue.

Catch up on the latest financial news; read Water Cooler Finance: Shocking Court Rulings, Sinking Markets.

Related Articles
  1. Economics

    The Delicate Dance of Inflation and GDP

    Investors must understand inflation and gross domestic product, or GDP, well enough to make decisions without becoming buried in data.
  2. Investing News

    Market Outlook: No Bottom Until 2017?

    These investing pros are bearish on the market in 2016. Will there be a bottom in early 2017?
  3. Economics

    Negative Interest Rate Policy (NIRP)

    A negative interest rate policy is an unconventional monetary policy tool in which nominal target interest rates are set below zero.
  4. Stock Analysis

    Domo Inc: An IPO Candidate in 2016?

    Learn about key information on Utah-based technology startup Domo Inc. and how the Domo dashboard differentiates itself in the world of business intelligence.
  5. Investing News

    How China's Economy is Now Like America's

    China's economy could take the global economy down with it; why that might be good news in the grand scheme.
  6. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  7. Investing Basics

    Consumer Confidence Index

    The Consumer Confidence Index is the result of a monthly survey of 5,000 U.S. households by the Conference Board that measures how optimistic or pessimistic consumers are about the economy's ...
  8. Economics

    Explaining Economic Indicators

    Investors use economic indicators to gauge investment opportunities and judge the overall health of an economy.
  9. Investing News

    Global Headwinds Hit the 6 Biggest Economies

    As of Friday, initial estimates for fourth-quarter and full-year 2015 growth in gross domestic product (GDP) are available for five of the world's six largest national economies, and for the ...
  10. Economics

    Economic Indicators: Reading Between the Lines

    On the surface, economic indicators are sending mixed signals, but what's brewing beneath the surface?
RELATED FAQS
  1. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
  2. Is Israel a developed country?

    Israel is considered a developed country, although it has substantial poverty and large income gaps. The International Monetary ... Read Full Answer >>
  3. Does working capital include stock?

    A certain portion of a company’s working capital is generally composed of earnings; however, current short-term assets that ... Read Full Answer >>
  4. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  5. What types of expenses are factored into autonomous consumption?

    Autonomous consumption is the level of consumption necessary to support everyday life in a zero-income scenario. Put another ... Read Full Answer >>
  6. Why is the employment figure important to a "dove"

    The employment figure is important to doves, because they are primarily concerned with the health of the labor market. Doves ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center