Mixed Picture for U.S. Economy Keeps Analysts Hedging Bets

Dec. 18: Shopping bags in hand, consumers walk down 34th Street in New York. Retailers saw a spike in holiday shopping the last weekend before Christmas as retail revenue went up 5.5 percent.

Dec. 18: Shopping bags in hand, consumers walk down 34th Street in New York. Retailers saw a spike in holiday shopping the last weekend before Christmas as retail revenue went up 5.5 percent.  (AP)

Economists, like doctors and weathermen, tend to hedge what they say carefully, so as to protect their reputation for accurate diagnoses, prescriptions, and prognoses. But the current economic climate is especially conducive to such hedging, because virtually every slice of economic data currently available depicts the U.S. economy as unusually fragile, a mixed bag on its best days.

A visit to the web page of the Bureau of Economic Analysis (BEA), a sub-unit of the Department of Commerce, confirms this yet again. The bureau reports that consumer spending rose slightly in November, by 0.4 percent, a modest increase that surely provided a tangible boost for retailers and other businesses just ahead of the peak holiday shopping season. 

But when measured against the month of October, when consumer spending rose 0.7 percent, the rate of growth for last month is seen, in real terms, to have declined.

Ditto for personal wages and salaries. Many economists will tell you that the key to increased spending, and broad economic growth, is an increase in wages, so that consumers have more money to spend. This was a core principle -- for both Democrats and Republicans -- in the recent debate over the Bush-era tax cuts, with the two sides disagreeing not only over deficit projections but also the question of which income brackets tend to spend money, and thereby boost the economy, more readily.

Here again, the picture is mixed. The BEA reports that private wage and salary disbursements increased $6.6 billion in November, compared with an increase of $31.2 billion in October, when the hiring climate was better.

More On This...

Likewise, the Commerce Department reported Thursday that the number of Americans purchasing new homes rose last month -- but again only modestly, and not enough to reflect real improvement in the housing market. 

With a 5.5 percent increase in the sale of new homes, Commerce projected a seasonally adjusted annual rate of 290,000 units sold. Economists consider an annual rate of 600,000 new home sales to be desirable, given the size of the U.S. economy. As well, the median price for homes sold last month fell to just under $215,000, almost 3 percentage points lower than the same period in 2009.

"Certainly things have improved significantly from the depths of the recession," Sam Chandan, global chief economist at Real Capital Analytics, told Fox News."Unfortunately, during the early part of 2010, the economy actually slowed a little bit from where it had been in the initial months coming out of the recession, when government programs were a significant driver of growth."

Looking forward, Chandan tended -- well, to hedge. He saw Internet businesses deriving greater benefit than "brick and mortar" retailers from the modest increases in consumer spending, and projected that those increases would continue well into 2011. But there was a catch, of course.

"(The rise in spending) is part of the impact of the tax cuts, some of those income constrained families really being able to take advantage of a few extra dollars in their pocket to buy more necessity goods in 2011," Chandan said, adding: "Whether or not that is going to really spur the kind of job growth that will lead to long-term and sustained improvements in the trajectory of the economy, I think that is an area where we have to be a little bit more reserved in our expectations."

But who could blame an economist for hedging, when, as any weatherman could tell you, the economy is plodding along in a gray, cloudy way, and all the doctor can prescribe is more income and spending growth?

James Rosen joined Fox News Channel (FNC) in 1999. He currently serves as the chief Washington correspondent and hosts the online show "The Foxhole." His latest book is "A Torch Kept Lit: Great Lives of the Twentieth Century" (Crown Forum, October 4, 2016).