News lately has been suggesting that the economy is on the road to recovery but according to an article written by Charles Hugh Smith, there are some potential road blocks, or potholes as he would like to call them, along that road. The author lists these five issues as follows:

1.) Employment. Although it may appear that unemployment rates are declining there are underlying reasons for this false façade. One being that fewer people are able to collect unemployment benefits; they may have exhausted them or in some cases are not reporting at all. On the outside this leads us to believe that because the unemployment numbers are declining, that jobs are being created, this is not always the case. Unless we start seeing a larger portion of the population collecting a paycheck we are less inclined to put any weight behind recovery rumors.

2.) and 3.) Real Estate. Commercial real estate continues to lose value and this can lead to additional bank failures. So many sectors of the workforce and economy rely on the real estate industry, especially new construction. Without an increase in valuation we can continue to see a drop in various industries’ profitability. Federal agencies have been supporting the housing market in efforts to create a stronger foundation for the mortgage industry. This support is expected to begin to decline due to the lack of increasing rates and new home sales. Banks are continuing to see a rise in delinquent loans, up from 1.84% in 2008 to 2.21% in 2009.

4.) Real Estate in China. Prices in China’s real estate market continue to increase at an alarming rate. This, as well as other global declines, like we are seeing in Greece and Portugal, can lead to a value reduction in the US and foreign trade markets.

5.) US Sales and Income Taxes. Sales tax revenues are also on a continuous downward cycle, providing a poor picture of what we know as the recovery story. Retail activity has not improved and is once again a staple point in the recovery of our economy.

People are still afraid to spend money, who can blame them? If the unemployment rate is not a true figure and economists are estimating that it is most likely higher than we are seeing, then people don’t have the money to put back into the economy. As consumers we need to continue to look for savings opportunities in all aspects of our personal and professional lives. As far as this recovery story we keep hearing, we need to approach it from a holistic angle and look at the facts as they are and not as they are presented to us. It is up to you to see the light at the end of the tunnel.
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Jennifer Ulrich

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  1. The true test of the economy recovering is, are the revenues from the onerous tax burden placed on us increasing or decreasing?
    If, as the president claims two million jobs have been "saved" or created, the tax revenues should be increasing.