If we are to believe the conventional wisdom floating through the media, the U.S. manufacturing sector is mounting a major comeback.
Not so fast, says financial writer Bob Woods.
"It's not quite 'Happy Days Are Here Again,' as some have been singing for the past few years. Once you look closely at the data, it's more like 'Those Were the Days,'"
he writes on CNBC.com.
And why is that?
The manufacturing sector has shrunk 3.2 percent since the worst recession in 80 years ended in June 2009, according to the non-partisan Information Technology and Innovation Foundation. About 15,000 factories have disappeared since 2007, the year the recession began, taking 2 million jobs with them.
"A look at the numbers suggests that the rallying cry about a manufacturing renaissance has been wishful thinking among many industry trade groups and economists," Woods states.
"Even favorable shifts in a host of factors, including labor costs, the shale gas boom, transportation costs and the weak U.S. dollar, hasn't revitalized the sector to its post glory days."
But when it comes to housing, Jason Cummins, chief U.S. economist for European hedge fund titan Brevan Howard, is concerned about too much strength.
The Federal Reserve has pledged to continue moving very slowly in raising short-term interest rates, which have stood at a record low for more than six years, and that stance threatens to ignite the second real estate bubble in a decade, he says.
"The risk [is] that the Federal Reserve will repeat its biggest mistake of the past decade,"
Cummins writes in the Financial Times.
U.S housing prices are rising 7 percent a year, averaging just 10 percent less than their peak level of 2006, he notes.
"There are good macroeconomic reasons to stimulate aggregate demand through an interest-rate sensitive sector like housing," Cummins maintains. The economy contracted 0.7 percent in the first quarter.
"However, such a strategy is not without risks," he says. "To delay normalization of interest rates is to risk repeating the mistake of the last business cycle, which was to create a house price bubble that overburdened many households. And the bigger the housing bubble gets, the greater the risk of a crash once rates are normalized."
Economists don't expect the Fed to raise rates before September.
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