I make no claim to any specialized knowledge of economics. I do have a question though. The following tit for tat got me thinking:
"What does matter is that we're seeing American financial institutions start to fail, due to the poor health of the American economy."
Really? Inflation is low, Unemployment is low, GDP growth is ok. I don't really see how you can define "poor health".
Didn't the growth of the housing market, and associated industries play an enormous part in increasing employment(1) as well as raising the GDP (2) in the recent past (1). Wouldn't a crash in the real estate industry have much more far reaching consequences on at least 2 of the 3 indicators that you are pointing to as signs of underlying economic health? I will defer to any expert opinion on this question, it is merely one I couldn't resolve on my own.
-iFeden
(1) Industry Employment
Data produced by the Bureau of Labor Statistics
The jump in employment in the housing-related series over the last 13 years is a good measure of the impact of the housing bubble. While overall employment increased by less than 22 percent from the 1993 to 2006, employment in the construction of residential buildings increased by almost 70 percent. Employment in real estate agencies increased by almost 30 percent over this period. Employment in residential specialty trade contractors increased by almost 28 percent in just the years from 2001 to 2006.
When the bubble deflates, employment levels in these sectors will fall back in line with their historic patterns, as construction and sales levels move to more normal levels.
If employment in housing-related sectors were to fall back to levels consistent with their share of their labor force in the mid-1990s, it would lead a loss of close to 1 million jobs. If the construction sector temporarily falls below its normal level of activity as inventories of unsold homes adjust to normal levels, the job loss would be even greater.
-From http://globaleconomicanalysis.blogspot.com/2006/11/housing-industry-employment.html
(2) Private Goods and Private Services Sectors Accelerated in 2006
Advance Estimates of Gross Domestic Product (GDP) by Industry
Newly available data on the industry distribution of real GDP growth show that the private services-producing sector accelerated to 4.1 percent in 2006, up from 3.7 percent in 2005, and that the private goods-producing sector accelerated to 2.5 percent, up from 2.1 percent in 2005. Real growth in government slowed slightly to 0.6 percent, down from 0.7 percent in 2005.
The private services sector's acceleration reflected more rapid growth in "finance, insurance, real estate, rental, and leasing" that offset slower growth in retail trade, information, and "professional and business services." Private goods-sector growth accelerated due to more rapid growth in durable-goods manufacturing and "agriculture, forestry, fishing, and hunting" and smaller decreases in mining and nondurable-goods manufacturing.
Real growth in manufacturing accelerated to 3.3 percent in 2006 after increasing 2.2 percent in 2005. This acceleration largely reflected stronger real growth in durable-goods manufacturing of 6.7 percent in 2006, up from 4.9 percent in the previous year. In 2006, durable-goods manufacturing accounted for 6.9 percent of the economy, but accounted for 13.6 percent of real GDP growth.
-From http://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm
Slashdot Mirror
I make no claim to any specialized knowledge of economics. I do have a question though. The following tit for tat got me thinking: "What does matter is that we're seeing American financial institutions start to fail, due to the poor health of the American economy." Really? Inflation is low, Unemployment is low, GDP growth is ok. I don't really see how you can define "poor health". Didn't the growth of the housing market, and associated industries play an enormous part in increasing employment(1) as well as raising the GDP (2) in the recent past (1). Wouldn't a crash in the real estate industry have much more far reaching consequences on at least 2 of the 3 indicators that you are pointing to as signs of underlying economic health? I will defer to any expert opinion on this question, it is merely one I couldn't resolve on my own. -iFeden (1) Industry Employment Data produced by the Bureau of Labor Statistics The jump in employment in the housing-related series over the last 13 years is a good measure of the impact of the housing bubble. While overall employment increased by less than 22 percent from the 1993 to 2006, employment in the construction of residential buildings increased by almost 70 percent. Employment in real estate agencies increased by almost 30 percent over this period. Employment in residential specialty trade contractors increased by almost 28 percent in just the years from 2001 to 2006. When the bubble deflates, employment levels in these sectors will fall back in line with their historic patterns, as construction and sales levels move to more normal levels. If employment in housing-related sectors were to fall back to levels consistent with their share of their labor force in the mid-1990s, it would lead a loss of close to 1 million jobs. If the construction sector temporarily falls below its normal level of activity as inventories of unsold homes adjust to normal levels, the job loss would be even greater. -From http://globaleconomicanalysis.blogspot.com/2006/11/housing-industry-employment.html (2) Private Goods and Private Services Sectors Accelerated in 2006 Advance Estimates of Gross Domestic Product (GDP) by Industry Newly available data on the industry distribution of real GDP growth show that the private services-producing sector accelerated to 4.1 percent in 2006, up from 3.7 percent in 2005, and that the private goods-producing sector accelerated to 2.5 percent, up from 2.1 percent in 2005. Real growth in government slowed slightly to 0.6 percent, down from 0.7 percent in 2005. The private services sector's acceleration reflected more rapid growth in "finance, insurance, real estate, rental, and leasing" that offset slower growth in retail trade, information, and "professional and business services." Private goods-sector growth accelerated due to more rapid growth in durable-goods manufacturing and "agriculture, forestry, fishing, and hunting" and smaller decreases in mining and nondurable-goods manufacturing. Real growth in manufacturing accelerated to 3.3 percent in 2006 after increasing 2.2 percent in 2005. This acceleration largely reflected stronger real growth in durable-goods manufacturing of 6.7 percent in 2006, up from 4.9 percent in the previous year. In 2006, durable-goods manufacturing accounted for 6.9 percent of the economy, but accounted for 13.6 percent of real GDP growth. -From http://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm