Economic Reports Reflect Underlying Concerns
By Jonathan Weisman
Washington Post Staff Writer
Tuesday, December 30, 2003; 1:59 PM
Consumer confidence, home sales and Midwestern manufacturing all slipped below economists' expectations in reports released today, amidst persistent concerns over the labor market and worries that the economy's recent robust gains may be easing.
Sales of existing single-family homes dropped in November by 4.6 percent from October's level and were off even more from the record level set two months earlier, the National Association of Realtors reported. Midwestern manufacturing continued its expansion this month, but at a slower pace than November's, according to the National Association of Purchasing Managers' Chicago office.
And consumer confidence backed off its recent surge, as more Americans expressed anxieties over business conditions and the availability of jobs, said the Conference Board, a private research group in New York.
"All three were a little bit weaker than expected, basically," said Jan Hatzius, a senior economist at the Goldman Sachs Group Inc., who called the "fairly substantial decline in labor market assessments" an "interesting and somewhat cautionary note."
The reports underscored two clouds hanging over the economic recovery: improving but still sluggish hiring and a housing market that may be losing steam after sustaining the economy through its long doldrums.
"A true recovery is finally underway, which is good. Two years into it and this is first time we can say that," said Jared Bernstein, an economist at the Economic Policy Institute. "At the same time, it's still a fragile one, and it still hasn't found strong legs."
Consumer confidence in November was at its highest level in 14 months, but this month, it slipped back to an index level of 91.3, from a revised November level of 92.5. The composite index is based on a comparative level of 100 set in 1985.
Out of 5,000 households surveyed, the number saying jobs are "hard to get" rose to 32.6 percent this month, from 29.6 percent. The number saying jobs are "plentiful" slipped to 12.5 percent, from 13.5 percent. Americans' appraisal of business conditions also lost ground, according to the survey.
"Job worries continue," said Lynn Franco, director of the Conference Board's Consumer Research Center.
That sentiment may reflect a disconnect that Americans feel between the upbeat economic numbers trumpeted in the press and their own experiences, Bernstein said. The economy grew at a stellar 8.2 percent pace between July and September, but inflation-adjusted wages rose a scant 0.2 percent over that period and figures for the final quarter of 2003 are expected to show an actual decline.
Job growth, while positive, has not been enough to drive up wages or alleviate employment anxieties, economists say. And that is likely to continue next year, as manufacturing and some service jobs move overseas, according to an economic assessment released today by retail bank Wachovia Corp.
"Employment gains will still underwhelm," concluded John E. Silvia, Wachovia's chief economist.
Housing sales and construction, which boomed during the overall economic slowdown, are finally showing signs of flagging, economists also caution. Existing-home sales in November fell to an annual rate of 6.06 million homes, from a pace of 6.35 million in October.
Economists had expected sales to barely slow, to a rate of 6.33 million homes.
David Lereah, chief economist at the National Association of Realtors, still called last month's sales "a very respectable number."
But few economists believe the housing market can continue to pull the economic train forward. "Home sales are clearly weakening," Hatzius said. "For 2004, the question is not going to be whether [housing] will be the locomotive. It's going to be how big a brake will it be."
Taken together, the three reports were not enough to dampen Hatzius' expectation of a strong, 4.3 percent economic growth rate for next year, powered by demand for U.S. products abroad and a strengthening U.S. business sector.
"It should be a good year," he said.
But Bernstein said the reports underscore his sense of caution.
"Before these numbers came in, there were other reasons to believe the recovery -- though far ahead of where it was a year ago -- is still fragile," he said, "and these reports give succor to that view." |
