The Economy - News from Washington

The Economy - News from Washington

The Economy:
Odds are recovery from this recession will be even patchier than usual. The broad housing pickup that usually accompanies such a period…a rising tide that lifts all boats…will be absent. Foreclosures will still weigh heavily on the market, and this time around, the Fed can’t cut interest rates to spur buying.
Likely to lead the pack: Tech heavy areas, such as Austin, San Antonio, Denver and Raleigh, N.C. Boston should also benefit from an increase in investment in technology equipment but lose much of the gain to ongoing financial service cuts.
Other pockets of swifter improvement: Ports…L.A. and Long Beach, Calif., Seattle and Tacoma, Wash., Jacksonville, Fla., and more…benefiting from export gains as the global recovery spreads. Energy hubs, too…Houston and elsewhere in Texas plus N.D., and Alaska…will enjoy an upward nudge from improving foreign economies. And government-dominated Washington, D.C., plus neighboring Md. And Va. Counties.

Lagging behind: Many manufacturing areas. Mich., Ohio and Ind., of course, will continue to suffer with depressed auto sales. But so will Tenn., Ky. and Ala.
Plus tourism dependent regions. Persistently high unemployment rates will delay a rebound in travel and tourism spending and be a drag of gambling meccas in Miss. And Nev. As well as on other vacation spots…Hawaii, La. And coastal S.C., for example. And the shortage of tourists will compound Fla.’s deep housing woes.

Figure on higher mortgage rates by spring, with 30-year fixed loans in the neighborhood of 6%, even higher if the recovery is stronger than now expected and businesses start selling corporate bonds to fund capital investment projects.
The upward push will come as the Fed quits buying mortgage debt. Right now, the Federal Reserve is buying about 80% of home mortgages being written, filling in for a largely absent private secondary market. But its effort to curb rates and prop up the housing market is slated to wind down between now and March 31, 2010.

The Kiplinger Letter – Washington, Oct. 2, 2009


"Faith is taking the first step even when you can't see the whole staircase."

~ Martin Luther King, Jr. (1929-1968)

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