Economic Face Off
12:00 AM, Jan 19, 2013 • By IRWIN M. STELZER
But things are looking up for the latter part of the year. The manufacturing sector has gotten over its temporary hiccup, and last month grew more than analysts expected, with upward revisions of the October and November pictures frosting on the cake. Motor vehicle and parts production rose, as did computer and electronics output, and output from mines. The housing sector continued on the upswing. In December, construction of both single-family and multiple-family homes rose in every region of the country, and permits for future building also showed gains. For 2012 as a whole, construction permits were up 30 percent and housing starts 28 percent over 2011. Home prices also continue to rise: the latest S&P/Case-Schiller Home Price Index shows a 4.3 percent rise in October, beating increases recorded a month earlier. And the banks seem in better shape than in recent years.
The jobs market also improved last year, with about two million new jobs added, and at long last there was a bit of decline in the number of workers unemployed for longer than six months. We will know in a few weeks whether that trend continued into the new year, but there are indications that it did: home builders, oil and gas companies, and high-tech industries are among those reporting difficulties in finding skilled workers.
Consumers so far remain unperturbed by the spectacle put on by Washington’s gladiators. Retail sales were up in December, bringing the increase for all of 2012 to a more than respectable 5.2 percent. Unfortunately, it is difficult to predict whether consumers will continue to contribute to growth this year because of the cut in take-home pay resulting from the several tax increases, which already seem to have had a negative effect on consumer confidence.
The fallout from Obama’s ability to force through tax increases, and uncertainty as to future fiscal policy, might be part of the reason that official forecasters are being cautious or, as some prefer, impervious to signs of strength in the economy, which include all of the above plus a resurgent energy sector and increased international competitiveness. The World Bank, as if setting out to prove that economists use decimal places to prove they have a sense of humor, raised its forecast of world growth in 2013 to 2.4 percent from 2.3 percent—it guessed 3 percent in July. It expects the U.S. economy to expand at an annual rate of 1.9 percent, which is about 0.5 percent gloomier than the Federal Reserve Board.
My own view is that if the political air clears by March, the strength of the economy will overwhelm remaining political weakness. After all, if winter comes, as it has, spring can’t be far behind.