CNBC reports that “Projections for an extremely weak third-quarter have been shredded and replaced with a fairly upbeat assessment of the quarter that just closed last month.”
The headwinds that have kept the U.S. economy at near-recession levels have not dissipated. Americans have not deleveraged enough to allow them to move back into the consumer markets. Most estimates are that holiday sales will rise less than 3% this year. That is hardly an indication that the concern about the economy has improved at all. Many U.S. homeowners still struggle with payments on homes that are worth far less than the mortgages on them. The White House believes this problem is so serious that it has proposed a new program to help Americans with underwater mortgages. The plan could help one million homeowners, but that is only a fraction of the 11 million who have loans higher than home values.
There are also no signs that unemployment will get better soon. The rate is stubbornly above 9%. While corporate profits have improved for most companies in the third quarter, many of the earnings improvements are due to ongoing cost cuts. That means, in many cases, more layoffs. Hardly a day goes by without some large company’s statement that it must downsize.
The forecasts for the health of the economy have swung very fast from pessimistic to optimistic. The next round of GDP announcements and unemployment figures, both due out soon, will prove that the new optimism is wrong.
Douglas A. McIntyre
Top Gaining Stocks
Top Losing Stocks