How Long Will Recession Last?

The US economic recession started in December 2007 and plunge the economy to an all time low. With George Bush out and with President Barack Obama in charge, the Congress and Senate wasted no time and immediately approved the massive $787 billion stimulus package which was designed to jump start the economy’s recovery.

The stimulus package plus the combination of smart government moves resulted to the economy getting a wild ride. Since the assumption of President Barack Obama the economy has been swinging up and down unpredictably. Last March, we saw the gradual rise of the economic indicators such as stock index which rose above the 8,000 level and housing industry’s increasing construction activity and sales. It seems everything is on track and government’s effort paying off.

However this month April we were greeted by mixed news of good and bad. The housing industry seems to be regaining its lost glory as it is the only economic indicator still on the rise while the stock market which was fed on negative information continue its wild fluctuation.

The housing industry continue its gain as the National Association of Home Builders announced that its housing market index had risen by five points to fourteen in the month of April. According to them it’s the highest point since October last year, though it is still very low as an index below fifty points indicates a negative sentiment about the market.

The index is a rough estimate of people’s perception of the housing market based on the current trends. This is further prop up by the performance of Homebuilders Stocks Index which continues to outperform other stock indexes. It is now up by 6.3 percent. Good news such as the buyout of Centex by giant homebuilder Pulte Homes for $1.3 billion helped support the index’s rise.

Big corporations such as Meritage Homes are now up by more than eight percent. Comparatively, the Dow Jones Index recently has been on a roller coaster ride going up and down on the slightest news update. It is now at 7,983 points.

This is despite the negative data reported by the Mortgage Bankers Association where the weekly mortgage applications dropped by eleven percent, on the back drop of one of the lowest mortgage rates of below five percent. The Mortgage Bankers Association reported that a 30 year fixed mortgage is currently 4.73 percent while Freddie Mac reported that it is at 4.87 percent.

With people opting to save than spend, last February have seen one the highest savings rate in the US history. This resulted to consumer prices going down by 0.1 percent last month March as reported by the Labor Department. The Federal Reserve announced that the factory, mining and utilities production went down by 1.5 percent last month. This is another sign of the population’s diminishing consumption.

The labor market also continue to decline as the unemployment rate is now hovering at 8.5 percent as of last March with around 663,000 people jobless.

And it will get worst as big companies such as UBS AG, Switzerland's largest bank will layoff 8,700 people in its global operation, while Yahoo is rumored to be planning kick out thousands of employees. By the end of the year, the unemployment rate is expected to rise up to 10 percent.

These developments just prove that the economy is still far stable and the slightest negative economic data will have a heavy impact on the people’s sentiment.