Hiring picked up much faster in July than expected. Car sales remain solid. Home prices are climbing again in parts of the country. It all points to a strong second half of 2012, right? Not necessarily.
Updated: August 11, 2012 - 9:05 PM
WASHINGTON - Hiring picked up much faster in July than expected. Car sales remain solid. Home prices are climbing again in parts of the country. It all points to a strong second half of 2012, right? Not necessarily.
Weighing against growth are the ongoing debt crisis in Europe, a clear slowdown in China and uncertainty over a bitter presidential election, expiring Bush-era tax cuts and the possibility of steep, across-the-board cuts in government spending.
That's led most economists to predict sluggish growth at best for the latter half of the year, and some even whisper that recession is possible next year.
"It's kind of what I call a very uncomfortable economy," said Mark Zandi, the chief economist for forecaster Moody's Analytics and a frequent witness before Congress.
Even Zandi's silver lining -- that construction will add growth in the second half of the year, pulling the annualized growth for the year to 2 percent or better, up from the second quarter's 1.5 percent -- "means we make no progress on unemployment."
With the jobless rate at 8.3 percent, "it means the economy is very vulnerable to what could go wrong," he said.
Kate Warne, an economist and market strategist for the investment firm Edward Jones, told a recent economic roundtable at the U.S. Chamber of Commerce that there are reasons for optimism, one of them being improvement in the housing sector. After several years of dragging against economic growth, it's now contributing to it.
The National Association of Realtors reported Thursday that the median sales price for existing single-family homes rose in the second quarter in 110 of the 147 metropolitan areas it tracks, compared with a year earlier.
But even that sign of improvement isn't likely to lead to a return of good times in the latter half of the year. "We think we're going to see more of the same," Warne said.
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