Long Term Economic Damage Left By Housing Bubble

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

In 2008, the U.S. housing market underwent an unprecedented collapse, the delayed consequences of which may still be burdening our gradually recovering economy. According to James Bullard, president and CEO of the Federal Reserve Bank of St. Louis, this event “in all likelihood caused a residual disturbance of our housing stability,” and despite the decrease in unemployment, Bullard maintains that the road to recovery could be long and arduous.
 
Due to the presidential election, concerns about the budget have been suspended, though the housing market has made little progress in recovering its former strength. Speculation on its growth potential for 2012 continues to paint a grey, uncertain future, failing to restore the shattered confidence and dispel the lingering uncertainty looming over this issue.

Bullard additionally commented that the unforeseeable future of the U.S. Healthcare system, in a state of unstable transition, has only compounded this uncertainty.
 
Although deeply pessimistic of the European debt crisis and its anticipated repercussions, Bullard expressed some hope regarding recently released unemployment statistics.
 
“In the most recent report of the U.S. labor market data, the stubbornly unmoving unemployment rate failed to meet more optimistic expectations. With the aggregate payroll jobs in the private sector reported at 84,000, the future looks to be bleak,” he said. “Nevertheless, the results for hours worked proved more hopeful as unemployment claims stayed under the threshold of 400,000. While this news provides a sliver of optimism, Bullard believes it insufficient in ameliorating the gloomy outlook of the U.S. growth potential and its anticipated sluggishness for 2012.
 
According to Bullard, the fault lies within the lack of confidence and certainty, lasting fallout from of the 2008 market’s abrupt decline.

In the face of the Europe’s significant recession, Bullard concludes that the U.S. and Asian economies have already begun to slump under the weight of the European burden.

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