In Charlotte, N.C., gasoline at nearly $4 a gallon is cracking “the survivors,” as credit counselor Bruce G. Hamlett calls them. They’re the people who played by the rules and kept up their mortgage and utility payments even as neighbors gave up and moved away, leaving empty homes, BusinessWeek.com reports.
Now, crazy prices at the pump are pushing even these survivors over the edge. “They’re asking, ‘Do I put gas in my car or do I pay this utility bill or do I pay the mortgage?'” says Hamlett, director of economic independence for Charlotte’s United Family Services. “It’s getting to the point where it’s an impossible choice.”
For the U.S. economy, the twin shocks from oil and housing have become mutually reinforcing, potentially turning what may be a mild recession into something more threatening. Even those economists who think the U.S. might dodge a recession are concerned. Home prices are seemingly in free fall in much of the country. The Standard & Poor’s/Case-Shiller National Home Price Index fell a record 14.1% in the first quarter from a year earlier, S & P; reported on May 27. And now oil. After surging nearly 30% in two months, to $131 a barrel on the New York Mercantile Exchange on May 28, oil is twice as expensive as a year ago. “Up until now, housing has been the bigger story. Now I would put energy at potentially the same size,” says James D. Hamilton, an economist at the University of California at San Diego.
It’s enough to make a lot of people downright depressed. According to the Conference Board Consumer Confidence Survey released on May 27, Americans’ expectations for the economy over the next six months hit their lowest point since the dark days of December, 1973,during a long recession triggered by an Arab oil embargo. Businesses aren’t feeling exuberant, either. New orders for durable goods fell half a percent in April, the third decline in four months. Michael S. Hanson, senior U.S. economist at Lehman Brothers (LEH), expects the U.S. economy to grow at a slow 1.2% in 2008 and an even weaker 0.6% in 2009 as the headwinds from oil, housing, and the credit crunch continue.
