NOT A GREAT SIGN – AT 5:05 P.M. ET:  What is the state of the economy?  Who knows?  Numbers are contradictory, but one thing that's clear is that the housing sector is anemic.  The bubble really has burst, and some economists feel the end of the pain is not near.  Inevitably, this has political implications.  The election year is 11 months away.  From Bloomberg:

Builders began work on fewer homes than projected in December, a sign the industry that triggered the recession continued to struggle more than a year into the U.S. economic recovery.

Housing starts fell 4.3 percent to a 529,000 annual rate, the lowest level since October 2009, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey called for a 550,000 rate. A jump in building permits, a proxy for future construction, may reflect attempts to get approval before changes in building codes took effect at the beginning of this year.

ompanies like KB Homes and Lennar Corp. project demand will be slow to rebound as elevated unemployment and mounting foreclosures discourage buyers. While low borrowing costs and falling prices are helping revive sales from last year’s post tax-credit slump, Federal Reserve policy makers are concerned housing may undermine the economic expansion.

COMMENT:  Unless some foreign catastrophe intervenes, the economy will remain the dominant political issue.  We are still facing high unemployment and a sagging housing market.  Unless these indicators improve, Mr. Obama could be in serious political trouble next year...assuming the public blames his administration for the continued distress. 

But don't underestimate the Obama political machine.  They will attempt to blame the Republican House for extending the recession, just as Harry S. Truman blamed the "Republican do-nothing Congress" in 1948, and won the presidency against huge odds. 

Further, don't ignore the power of the price of gas at the pump.  It continues to rise, just as the Obamans are making additional drilling in the U.S. extraordinarily difficult.  Nothing like a kamikaze economic policy.

January 20, 2011