A significant trio of quarterly economic studies released last week delivered somewhat contradictory messages. Overall they painted a picture of a U.S. economy that, while confusing and even fragile, in some ways still performed better than expected. Most of the good news was contained in a Department of Commerce second-quarter report that suggested the economy is finding ways to compensate for the housing market slump and that inflation is still largely under control despite the oil and energy spike.
Residential investment and homebuilding have dropped by 9.8 percent, but construction spending by businesses is up 22 percent nationally. Also, foreign trade was looking better, with export valuation increasing 5.1 percent while import costs rose only 0.6 percent. The gross domestic product increased a better-than-forecasted 2.9 percent, although that is little better than half of the previous quarter’s 5.6 percent boost.
Meanwhile, the annual demographic survey by the U.S. Census Bureau says median household income improved 1 percent last year, although the nation’s poverty rate remained unchanged and median individual income actually dropped by about 1.5 percent. This seemingly contradictory result apparently means that lower-income households are working at multiple worse-paying jobs in order to keep up with expenses.
Another ominous trend in the Census Bureau report was that a record 47 percent of Americans had no health insurance, and coverage by employers is steadily eroding.
Looking more closely at the Bay Area, the quarterly survey of business confidence by the Bay Area Council was at its lowest point in three years, despite the announced intent by 39 percent of local employers to hire more workers in the next six months. Reflecting the housing market downturn, managers in the financial services industry were more pessimistic than those from the somewhat recovering Internet and high-tech sector.
The Examiner’s Aug. 31 analysis of the Census Bureau figures revealed that the $57,496 median income of all San Francisco households is not enough to buy a home, which would typically cost at least $500,000 locally. Many people are obviously still willing to live here because of the Bay Area’s beauty, climate and culture, but many others could well be leaving for cheaper climes or refusing to come here for employment.
The Bay Area Council also estimated that because of our overall high cost of living, a San Francisco professional earning $70,000 yearly would be unable to save any money, while that same salary in Seattle would leave $19,000 for savings, or $22,000 in Charlotte, N.C.
It is hard to know what all of this contrasting information portends for the future, but any public policy shifts that fail to harmonize with sound economic principles are likely to place the region’s fragile prosperity at higher risk.