Don't Pop the Champagne Corks Yet, The Obama Economy Remains in Critical Condition

WASHINGTON - Over the long, hard course of Barack Obama's painfully slow, job-scarce, sub-par economy, he may have set a record for persistent media reports that his shaky recovery was finally showing signs of strength.

This week, the president's economic cheerleading squad was back on the field again, applauding new data showing housing prices hitting the highest level in five years, rising consumer confidence and a bullish stock market rally that pushed the Dow to record highs.

Once again, the news media's euphoria was splashed across the front pages of the nation's newspapers and led the TV nightly news shows. Surely this really was a turning point for the economy, they said. This time, it's turned the corner for good and there's no turning back.

The liberal Washington Post, who had cheered so many previous signs of an economic comeback, only to see their expectations crumble in a wave to weak economic reports, could hardly contain its glee:

"A U.S. economy that was supposed to be barely hanging on is starting to look surprisingly robust," the Post gushed in its front page lead story Wednesday.

It may be true this time, but we've heard this fairy tale so many times before, only to see an over-regulated, over-taxed, big spending, deficit-ridden Obama economy turn back into a pumpkin of frightening statistics: anemic job creation, slower economic growth, stagnant wages, weak capital investment, a shrinking labor force, high gas prices, and a health care law that threatens to kill small business job creation.

In Obama's first term, we heard Vice President Biden proclaim in 2010 that this was going to be "the summer of recovery," only to see economic growth sag, the jobless rate worsen, poverty rates rise, and one million Americans lose their homes.

The president, proudly pointing to monthly job creation numbers (no matter how weak the job numbers were), told us in 2012 that "we're making progress" and the economy is coming back.

But more than 24 million Americans were unemployed, underemployed at the beginning of last year or had given up looking for work, pushing the real jobless rate to nearly 15 percent.

By the end of 2012, the economy was barely growing by 0.4 percent in the fourth quarter. It crept up to around 2.5 percent in the first three months of this year, but some economists were forecasting slower growth between April and June.

There are reasons to question the economic impact of the latest rise in home prices as measured by the S&P/Case Shiller home-price index.

The Wall Street Journal warns that the Case-Shiller index "can sometimes overstate the magnitude of price increases because it includes foreclosures."

The index data, released Tuesday, showed home sale prices climbing 10.2 percent in March from a year earlier. However, another index by Lender Processing Services, Inc. found that prices rose over this same period by 7.6 percent.

To be sure, record low mortgage rates are bringing out a lot of home buyers, increasing home sales and boosting prices. But a large proportion of these purchases are from well-capitalized real estate investors, picking up relatively inexpensive properties to rent, until the home values rise because of growing demand.

That suggests that rising home sales do not reflect a truly large base of ordinary homebuyers, some of whom now own homes that are under water and have little or no equity to use for another down payment on a new home purchase.

Even with the rising home prices in the first quarter, 44 percent of American homeowners were holding mortgages that were greater than their home was worth, according to the Negative Equity Report published by Zillow, the widely-read real estate website.

Their report showed that 25.4 percent of homeowners were entirely underwater, and that another 18.2 percent were "effectively" underwater because their equity would not produce 20 percent down payment for another home.

Then there is the "bubble" factor. Home prices are rising from rock bottom levels after the crushing housing debacle in 2008. Left out of most euphoric home sales reports is the fact that home prices were still well below their 2006 highs by at least 28 percent.

Missing from all the hype about rising home purchases is this stunning factor: U.S. homeownership is at its lowest rate in years and is shrinking.

"An estimated 91,000 U.S. homeowners became renters since the start of 2012, a decrease that pushed America's homeownership rate to its lowest level in 18 years, a U.S. Census report shows," according to the Real Estate Blog website.

"Sixty-five percent of Americans owned their homes during the first quarter, compared to 69.2 percent in 2004," the Blog reports.

In other words, the U.S. housing industry still has a long way to go before it will have a significant growth impact in a $17 trillion economy.

Still, home sales are rising, although there will be ups and downs in their overall numbers in the months to come. Whether the upward rise in sales and prices remains to be seen. There are still many obstacles ahead in the Obama economy that can undermine future home sales.

Federal Reserve Board Chairman Ben Bernanke has been suggesting lately that the Fed may begin raising its near-zero interest rates in the future, pushing mortgage rates beyond the reach of many Americans.

High unemployment still looms over the economy at 7.5 percent, and the latest mediocre jobs figures suggest we are not going to see major changes on that front anytime soon.

The Obama economy produced only 165,000 jobs in April, far below what is needed to bring the jobless rate down to more normal levels in the next several years.

So it's a little premature to be popping champagne corks on the basis rising home prices. This is an economy that is still in recovery.

Looks like it's time to whip this out again... (and besides, there were some problems with the last iteration... oops)

There you have it. Realize it or not, you're looking at a failed economy. 40 million of your fellow citizens who should be working, aren't.

Take a look at the cell at the bottom of the column just right of the dates and compare it to the figure on the far right. You should see 134,839 vs 175,086 (numbers reported in 1000s)

That's a difference of over 40 million jobs. And that figure is how underemployed we are right now in the United States.

Obama's recovery? Are they on crack cocaine? Put down the pipe reporters, you've got a story to tell, and you better get it right.

I looked up the combined government + private sector jobs back before the 1945 shown in my chart. You can see job growth figures reported out in 1945, that referenced earlier data. I just didn't show it all.

I actually started developing a figure we could reference for expected job growth. I started using the data that reported out in 1965, because the figures from then until 2001 were fairly steady.

This allowed me to find a fairly good average growth in jobs we should expect every four years. I picked every four years, because it could be tied to the policies of our presidents.

These figures were tied to the inauguration day every four years. From 1965 to 2001, jobs grew by 95.23%. Yes, there was more growth than that, but when you take the percentages every four years and add them up, you naturally come up with a smaller number. Consider this: if you start at 100 and increase it by 5, that's 5% growth. If you increase 105 to 110, that's no longer as much as 5% growth. It's now 4.76%. Add 5% and 4.76% and you'll have a 9.76% total. Of course that's less than the 10%, which was the actual growth over two terms. When you calculate the percentage in each term, you'll always wind up with a precentage smaller than the total growth as long as we're talking positive numbers. That's the way it works.

95.23% growth over 10 terms, equals 9.523% average growth. To check the validity of this number, I starting showing a projected growth figure on the right, so that I could compare it to what the real figure was. Check out the figure in 1997. After 36 years (remember 1965 figures reflect growth since 1961), the model on the right is within 403,000 jobs. That's spread is only 0.33%. The model thus works out very closely for the first 9 terms, and is only off by 734,000 or 0.55% by the 10th term. That's about as good as we could hope for.

Look what happens after 2001. Check out those four year growth rates. Bush actually came up with the first negative figures on the chart by the end of his first term. During his second term his growth figures over four years were 0.85%. That works out to 0.82% jobs grown over his two terms in office. The word enemic doesn't begin to cover it. Note the average job growth for four years down at the bottom of that column. During the ten terms in the study, the average was 7,887,000 new jobs each four years. In Bush's TWO terms, he increased jobs by 1,083,000. It should have been something like 15,754,000 new jobsf

Watching how the model figures on the right grew through 2013, you can see about where we should be if we had had traditional grown. Well we didn't have it. Instead we're 40 plus millions jobs short of where we should be.

So Obama, you've got a really great economic boom here..., if we're talking third world nation standards.

Get people back to work you ass.

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