The Drum Beats of a Second Recession

If you read daily headlines – the constant drum beats of no job growth, declining housing prices, and European Debt Crisis can make you feel like you’re on a constant roller coaster and hanging on for your life. The reality is that the US and World economies are much interconnected.  The US Banking and Mortgage Crisis sent us into a recession in 2008 and the European Debt Crisis is hurting banks once again threatening to stall recovery and send the US back in to recession.

In the August 2011 the Bureau of Labor Statistics reported that the US economy added zero new jobs and the Nation’s Unemployment rate is holding steady at 9.1%. Job growth was actually negative for the June and July period because the previously report June and July numbers were adjusted down by 58,000 jobs.

The weaker than expected jobs outlook and concerns over European Debt and Banking defaults have resulted in an 18% correction in the US Equities market since 7/19/11. One positive is that the selloff in the stock market and flight of investor to less risky assets has resulted in rally in the bond market. The bond market rally has further pushed home mortgage rates to an all time low.

So how should the typical consumer respond to the current market conditions?  There is overwhelming political talk these day about balancing the budget, cutting spending and getting our fiscal house in order. We have little control on whether or not that will happen at the Federal and State level. However, consumers can take control of their own finances and cut expenses by refinancing that home at today’s historic low rates and limiting discretionary spending.  Every effort should also be made to avoid the use of high rate consumer debt, bank transaction costs, and the penalties associated with delinquent property tax payments.