In June, the Commerce Department says that consumers boosted their spending but at the slowest pace in nine months. By July, consumer confidence hit a six-year high, said The New York-based Conference Board. Of course, that report was before the stock market started whipsawing from record levels to nearly 9000 points lower on several scary reports, including Countrywide's announcement that prime borrowers were beginning to have trouble repaying their exotic loans. That means the subprime mess is more infectious than people thought it would be.

On news like that, economists look to jobs. This week, the U.S. was still adding new jobs, but at the slowest pace since February, 2007. Another disappointment.

Consumer spending is credited for about 70 percent of gross domestic product, and when they close their wallets, housing sales will slow down even more.

Incomes rose slightly at 0.4 percent for the second month in a row, but skeptics could say that incomes are stagnant and are only being pulled upward by overpaid executives at the top of the food chain. They say the same thing about housing -- that the higher prices amid slower sales reflects the sales of more expensive homes moving the needle.

Somebody's getting paid a lot, and spending a lot on houses, but it isn't the average Joe.

Average Joes were nervous in June about high gasoline prices. This month they're worried about their 401Ks.

With the home equity ATM machine depending on instant equity, easy credit, and ready buyers, home prices had reached record levels in 2001 through 2005, but when adjustable rates reset at higher interest rates in a market where houses weren't selling, defaults began to pollute and expand inventories.

With home buyers balking at still-high home prices, consumers in general aren't going to feel as flush.

That can only mean more bad news for housing.

The good news is that a 4.6 percent jobless rate is still low, says the White House . Wages grew slightly -- a 0.3 increase in July from June to average hourly earnings of $17.45. Real Wages rose 1.3 percent over the 12 months ending in June. 

The White House contends that since August 2003, "more than 8.3 million jobs have been created, with more than 1.8 million jobs created over the twelve months ending in July. Our economy has now added jobs for 47 straight months, and the unemployment rate remains low at 4.6 percent. 

But for the second quarter, the economy (or inflation) grew 3.4 percent, far outpacing the gain in salaries. Since 2001, the economy has grown 2.7 percent annually, so any way the figures are sliced, they still come out to average Joes not taking home enough to cover inflation. Sooner or later, that's going to slow down spending, and the pull on the reins may have already begun.

One glimmer of hope is that the Federal Reserve will lower short-term interest rates, which in turn will influence mortgage interest rates to go down again, raising affordability for more homebuyers who must qualify in a not-so-easy lending environment.