Do we face an economic downturn?
For some time we have heard that "this event" or "that change in policy" or "an interest rate hike" will cause the economy to falter. As yet, most of those concerns have yet to materialize.
But, then, there is that continuing apprehension that something may just be just around the corner. Well, maybe we are approaching that corner faster than we would like.
On the interest rate front, the first thing we notice is the slow down in demand for housing, or a reluctance to purchase the larger houses. One of those little warning signs is a substantial decrease in the requests for new loans. New mortgages, refinancing and even home equity loans have fallen 15 to 20% from last year's level for the same period.
While not now reaching new heights, loan foreclosures are poised within the 12 to 18 months to take some interesting turns as the interest only mortgages begin to convert to principal and interest.
Some other anecdotal information indicates that many folks, who were pushing the envelope even with good incomes, now find themselves having to cut back on discretionary spending. One of the first items to go is donations to non-profits. Another seems to be next fall's lower enrollments for private/parochial elementary and secondary schools. While not of any great magnitude, they can be indicators of that slowdown in economic growth.
Then, we get into the biggest threat of all, the continued rise of gasoline prices. So far, many of us have been able to handle this in the short term because we believe prices will go back down, or that government will intervene. But what if the prices continue their upward creep to say $3.50 a gallon or higher? What if government solutions are too little, too late?
Everything we buy will need to carry a higher price, as almost everything is delivered on some type of combustion engine vehicle.
Then there is the looming rate hikes in electricity (so much for deregulation - yet again) that by next year should really make the economic mix light up (pun intended).
So, as that corner approaches what will we see?
We will do okay, but it will not be without some belt tightening. You might be able to buy a Hummer real cheap, while waiting in a long line for the next hybrid car at premium prices.
Perhaps we should stock up on 40-watt light bulbs as we use up the stash of 60-watt bulbs bought when they were last on sale for half price.
Who knows, we may even begin to eat family meals at home more often because the $5 fast meal #1 could be $6.50!
Even without a crystal ball these signs have been visible several times before. We can only hope we never have to experience odd/even days for buying gasoline or mortgage rates in the double digits again.
But, then again, it seems about every 10 years or so - early in every decade - something turns the corner. In the early 1970's job layoffs were the indicator of an economic downturn. In the mid-1980's it was having salaries frozen for almost two years. As for the early 1990's it was home assessments being lowered for a three years period. So, are we due again?
We are in a region of high growth for new jobs, yet at the same time low growth for housing. The economic dislocations caused by this disparity do not bode well for anyone with a household income of less than $100,000.
For them it will be longer commutes with rising fuel prices eating into other areas of their budgets. Just recently it was learned that several employees of a health care facility who work three 12-hour shifts are put up in a local motel by their employer for the nights they must spend in town because they live beyond the other side of Cumberland.
At what point will stretching the rubber band of daily living reach it's breaking point for all these families living at the extremes of the income?
Even without a crystal ball, it is obvious that something has got to give. Our life style could be compared to a fact of nature, that the forces of our economic system are like several tectonic plates pushing against each other, building pressure and it will be just a matter of time before that pressure seeks relief.
Let's hope that all we see are some mild tremors, not an 8.5 on the Richter scale.