"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.


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.


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%.


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.


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

    Long-Term Investing Impact of the Paris Attacks

    We share some insights on how the recent terrorist attacks in Paris could impact the economy and markets going forward.
  2. Economics

    5 States with the Highest GDP Per Capita

    Learn about the top five states ranked by their real gross domestic product (GDP) per capita as of 2014: Alaska, North Dakota, New York, Connecticut and Wyoming.
  3. Stock Analysis

    The Biggest Risks of Investing in Sears Stock

    Learn about the factors that have led to Sears Holdings' underperformance the past several years and where the ailing retailer could be heading in the future.
  4. Investing

    The Hazey Outlook for the Marijuana Industry

    Political change involving marijuana legalization lags behind the public's support for marijuana. It's a booming industry facing many challenges.
  5. Stock Analysis

    4 Key Indicators That Move The Markets

    Educated investors need to keep their finger on the pulse of the economy, and watching certain indicators is a good way to do that.
  6. Brokers

    The Next Industries Bound to be Uberized

    As more startups succeed with the sharing economy business model, investors seek out businesses poised to disrupt their industries like Uber.
  7. Mutual Funds & ETFs

    The Next Big ETFs Might Be From Latin America

    These ETFs are an excellent place to start for any investor interested in betting on Latin America.
  8. Fundamental Analysis

    Investment Banks: Not a Good Bet Right Now?

    Investment banks might appear safe to investors at the moment, but they're probably more dangerous than advertised.
  9. Active Trading Fundamentals

    Learn To Use This Leading Indicator of Home Sales

    By following the trend shown in the MBA Purchase Index, investors can identify investment opportunities in businesses that are poised to benefit, and find cautionary signals around industries ...
  10. Investing

    Is US Inflation Too Low?

    One reason the Fed has delayed its first rate hike: U.S. inflation has been persistently running below the stated 2 % level the central bank seeks to target.
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. How does the U.S. Bureau of Labor Statistics calculate the unemployment rate published ...

    The unemployment rate is one of the most closely followed indicators, used by businesses, investors and private citizens ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center