EconomicCrisis.US

Housing led the U.S. out of seven of the last eight recessions. This time, it may kill the recovery.

Home sales collapsed after a federal tax credit for buyers expired in April. Since then, the manufacturing-led expansion, which began in the second half of 2009, has been waning, with jobless claims rising and factory orders falling.

“If foreclosures continue to mount and depress home prices, that could send the economy back into a recession,” said Celia Chen, an economist who tracks the industry for Moody’s Analytics Inc. “The housing market and the broader economy are closely intertwined.”
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Applications for unemployment benefits in the U.S. unexpectedly increased last week to the highest level since November, showing companies are stepping up the pace of firings as the economy slows.

Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, Labor Department figures showed today in Washington. Claims exceeded all estimates of economists surveyed by Bloomberg News and compared with the median forecast of 478,000. The number of people receiving unemployment insurance fell, while those getting extended benefits increased.
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U.S. consumer spending was flat in June as incomes stopped growing and prices remained subdued, pointing to a weaker economy.

Separately, U.S. factory orders fell by more than expected in June from May, providing further signs that the U.S. economy may be weakening. Meanwhile, an index that tracks future home sales posted a decline.

Consumer spending, a key driver of economic growth, was unchanged last month after growing a revised 0.1% in May, the Commerce Department said in its monthly report Tuesday. The May figure was originally reported as a 0.2% rise.
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The U.S. economy is out of the ditch. But is there enough gas left in the engine to reach highway speed?

The recovery faces a crucial test over the next couple of months: Either it will pick up vital momentum from increased consumer spending and investment or stall out, dipping into a period of anemic growth — or perhaps even another recession.

Forecasters knew this inflection point would arrive, a moment when consumers and businesses must take over for government stimulus spending and the rebuilding of inventories.
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