In recent weeks, the Biden administration has ramped up its efforts to fool Americans into believing the United States has entered a golden era of economic prosperity.
"Here's what Bidenomics looks like," President Joe Biden said July 21 on Twitter. "Over 13 million new jobs, including 800,000 manufacturing jobs. Unemployment below 4%, the longest stretch in the last 50 years. Inflation has slowed every single month for the last 12 months."
As I've written previously, Biden's claims about job growth and unemployment are greatly exaggerated. A fair look at the evidence shows most of the economic gains that have occurred in Biden's first term are due to the COVID-19 lockdowns ending, something the White House deserves very little, if any, credit for.
Even more important, however, is that Biden has failed to acknowledge the growing amount of economic data signaling the country could soon enter an economic recession. One of the most overlooked and reliable indicators—housing data—suggests the emerging recession could end up becoming the largest in six decades.
From the fourth quarter of 2020 to the fourth quarter of 2022, the U.S. housing market experienced one of the most significant increases in housing prices in American history. Data provided by the Federal Reserve Bank of St. Louis show that over that two-year period, the average sales price of a home skyrocketed more than 36 percent, from $403,900 to a whopping $552,600.
For the first time in history, the 12-month increase in home prices topped 15 percent for seven quarters in a row, beginning in the second quarter of 2021.
Many current homeowners celebrated the unprecedented rise in housing values, but those rapid increases came with an important caveat: whenever housing prices increase as quickly as they have in recent years, an economic, stock market, and/or housing crash is almost certain to follow.
The evidence on this point is well established. In the 1970s, late 1980s, and in the early to mid-2000s, there were similarly large, sustained growths in housing prices. In every case, a large recession followed. And although the rule doesn't always apply perfectly, it tends to be that the bigger the increase in housing prices is, the harder the economy falls.
One reason for the correlation between swift growth in housing prices and recessions is that housing prices can be a good indicator of an overheating economy in need of correction. Another is that, historically, when housing prices move upward too quickly, the Federal Reserve often raises interest rates, slowing overall economic growth—a scenario that's occurring now, as America's central bank seeks to curb historically high inflation.
Of course, if this theory holds true, it would mean that Americans could soon experience unprecedented drops in housing prices, and perhaps an equally large recession to follow. If past performance is illustrative of the kind of economic crash we can expect, the upcoming recession could be the largest in more than half a century.
Unfortunately, the latest housing data seem to point in that troubling direction. In the first quarter of 2023, housing prices declined by 8.56 percent compared to prices in the fourth quarter of 2022. That's the largest single-quarter decrease since at least 1963, the earliest year in the data made available by the Federal Reserve. (Prior to this year, the largest recorded decline in housing prices was 7.09 percent during the first quarter of 2009, when the housing market was still reeling from the Great Recession.)
Sales data recorded for the second quarter of 2023 show prices decreasing even further, by $10,200 per home sold, or about 2 percent compared to the previous quarter.
If a large recession soon develops, there should be no mystery as to who deserves the blame. Since the day he entered the White House, President Biden has run up massive deficits and substantially increased government spending, fueling inflation.
The Federal Reserve kept interest rates too low for too long, and it encouraged Congress to spend far more money than it should have during the COVID-19 lockdowns.
Congressional Democrats foolishly took advantage of the Fed's reckless monetary policies, spending trillions during and after the COVID-19 pandemic, including on outrageous policies like sending "stimulus" checks to Americans who had not lost their jobs during the pandemic.
Even former president Donald Trump deserves some of the blame, albeit less than those mentioned previously. He failed to reduce government deficits before the pandemic started; he called on the Fed to keep interest rates low throughout his time in office; and he signed many of the Democrat-backed coronavirus relief packages that helped create the current inflation crisis.
Over the past few years, America's elected and unelected leaders created the conditions for a massive economic recession, and the available data seem to show that as a result, an economic downturn is right around the corner.
I hope I am wrong, but in the event that the past turns out to yet again be a good indicator of the future, Americans should prepare for tough times ahead.
Justin Haskins is the director of the Socialism Research Center at The Heartland Institute and a New York Times bestselling author.
The views expressed in this article are the writer's own.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
