economy – Page 41 – Hank Kalet

More evidence of an economic meltdown

Consider these recent news items.

From my paper, the South Brunswick Post:

The nation’s economy is teetering on the edge of recession, creating hardships for families around the country.

And few know this better than a single-mother of a special needs child in South Brunswick whose school-aide salary used to be enough to cover the bills for her and her daughter.

The woman, who asked that her name not be used to preserve her privacy, said that the rising cost of utilities, food and gasoline have forced her to do something this year that she has never done before: go to township Social Services for help paying bills and putting food on the table.

She is not alone. In every month this year, the township’s Social Services food pantry has seen an increase in families seeking help. The biggest jump came in July, with 41 families needing the pantry’s assistance compared to 21 in 2007, according to Social Services Director LouAnne Wolf.

The trend is not limited to South Brunswick. America’s Second Harvest, a national food bank organization, conducted a survey in April and May of 180 food banks throughout country and found that 99 percent of the banks reported an increase in usage in 2008 compared to 2007. The average increase was between 15 and 20 percent, with 90 percent of the people citing food and gas prices as the driving factor behind the increased need.

From The Record:

Foreclosures in New Jersey rose 11 percent from July 2007 to July 2008, RealtyTrac said today . Nationally, foreclosures were up 55 percent, RealtyTrac said.

One in every 751 households in New Jersey was in some stage of foreclosure in July, compared with one in every 464 nationwide, RealtyTrac said.

Banks continue to repossess homes nationwide at a fast pace, said James Saccacio, CEO of RealtyTrac, which publishes a national database of foreclosure properties. According to Saccacio, RealtyTrac has more than 750,000 bank-owned properties in its database, representing about 17 percent of the inventory of existing homes for sale reported in June by the National Association of Realtors.

Foreclosures are rising because many homeowners who got adjustable, subprime, interest-only or other exotic mortgages during the housing boom now find that their monthly payments have re-set to higher levels that they cannot afford. Because property values have declined across most of the nation, these homeowners can’t simply sell their homes to shed their mortgage burden.

From The New York Times:

Another month of weak retail sales in July added to evidence that the spending power of American consumers has weakened considerably, despite the booster shot of billions of dollars from the government’s tax stimulus program.

Even as gasoline prices started to retreat, consumers paid more last month for imported goods, the government reported on Wednesday, as import prices rose at the fastest annual rate in 25 years.

The dour economic data put pressure on stocks, sending the Dow Jones industrial average down 109 points on Wednesday as financial shares fell for a second day. Disappointing earnings reports from John Deere, the farm equipment manufacturer, and the retail giant Macy’s also depressed investors, along with a nearly $3 increase in oil prices, which settled at $116 a barrel. The Standard & Poor’s 500-stock index fell 0.3 percent.

With the stimulus payments at an end, Americans now have fewer buffers between their pocketbooks and higher energy costs, falling home values and the tight credit market. Companies and investors are bracing for spending to fall even further this year.

“I had been hoping that the second half of the year would be better than the first half,” Michael T. Darda, chief economist at the trading and research firm MKM Partners, said. “But we’re not creating jobs in the private sector. You’ve got the credit situation getting tighter, along with stock prices coming down and home values falling. That’s a cocktail that’s going to leave a vicious hangover.”

From The Washington Post:

Inflation continued to surge in July, with food and energy prices contributing to the sharpest price increases in 17 years and helping drive down workers’ spending power at a rate not seen since 1990.

Overall consumer prices rose 0.8 percent on a seasonally adjusted basis from June to July, the third consecutive month of rapid inflation, according to government data released today. During the past 12 months, prices have risen 5.6 percent, the largest increase since January of 1991.

Energy prices increased a full 4 percent over the month, accounting for about half of the overall jump in the Consumer Price Index. Food prices also continued to rise sharply, jumping 1.2 percent from June to July.

With the economy growing slowly, federal policymakers are watching inflation closely to see if the fall-off in economic activity will relieve pressure on prices. So far, however, that has not been the case, particularly with energy prices rising quickly and oil in particular moving to record highs.

Not exactly a rosy picture of the economy.

Foreclosing on reform

The federal housing bailout bill passed by Congress, which has a promise of a signature from the president, is fine as far as it goes.

The problem, as the progressive economist Dean Baker notes, is that it doesn’t go very far at all.

The bill allows lenders to bring failing mortgages to the Federal Housing Authority (FHA), which will guarantee a new mortgage at 85 percent of the current appraised value of the home. The Congressional Budget Office (CBO) estimates that lenders will bring 400,000 mortgages to the FHA over the next three years. CBO expects that 140,000 of these mortgages will go into foreclosure a second time, leaving a net of 260,000 homeowners who will hang onto their homes as a result of this program.

By contrast, there are likely to be 2.5 million to 3 million foreclosures in both 2008 and 2009. This means that the housing bill will likely help less than five percent of the families facing foreclosure over the next two years, leaving 95 percent of this group out of luck.

That’s 19 of 20 homeowners that will be left out in the cold, while

securing the multimillion-dollar salaries of the top executives of Fannie Mae and Freddie Mac, and protecting their shareholders from facing the full consequences of their bad stock picks, the bill also provided funds for guaranteeing new mortgages for homeowners facing foreclosure.

Baker touts an alternative:

the Saving Family Homes Act, which would allow many of these homeowners to stay in their homes.

The bill, sponsored by U.S. Rep. Raœl Grijalva, works like this:

The bill temporarily alters the rules on foreclosures. It allows homeowners facing foreclosure the option to stay in their home as renters paying the fair market rent. They would be allowed to remain in their home for up to 20 years. The bill would only apply to homes that were purchased for less than the median price in the area. This ensures that it only benefits those most in need of help, rather than millionaires who made bad bets in the housing market.

But most of those in Congress lack the creativity — or, more important, the political courage — to buck the conventional wisdom, which generally sides with the money.

The economy is basically sound — yeah, right

New Jersey is not ground zero for the national foreclosure crisis — and still the foreclosure rate in the Garden State is up 140 percent over the last three months. Congress has acted, passing a bailout bill that will enhance regulation and provide money for lenders and borrowers. The question is whether it will be enough to slow the downward spiral and keep the economy from completely melting down.

Economic meltdown

The housing market is in disarray, and now interest rates are rising — bad news for the American economy, especially those already facing hardships.

The rise in rates is of greatest concern for homeowners whose mortgages required
them to pay only the interest on their loans for the first few years. If such
borrowers are unable to refinance into lower-cost loans, many of them will face
the prospect of having to pay both interest and principal at higher, adjustable
rates.

Or lose their homes.

But that’s not all. Fuel and heating costs are moving beyond what most Americans can afford and politicians — especially the empty suit in the White House — are dithering and pandering, their solutions little more than handouts to the oil industry at a time when we need to be addressing demand.

And then there are food prices. Milk and other staples are rising here, but they are rising even more quickly around the globe.

Taken together, things look pretty bleak — but the president offers crumbs.

McCain’s clueless economics

John McCain, the Republican nominee for president, proves how little he knows about the economy every time he opens his mouth on the economy. Consider the add embedded in this post in light of this story from The New York Times:

About 62,000 jobs disappeared in June, the government reported Friday, the sixth consecutive month that payrolls have declined, as businesses rushed to lay off workers amid the worst economic climate in a generation.

And as job losses mount, even those still on payrolls have felt the pain: employers are putting hours for their full-time employees and shrinking salaries, just as workers face record-high prices for gasoline and food.

The unemployment rate stayed steady in June at 5.5 percent, the highest level in four years. The elevated figure dispelled speculation among some economists that last month’s half-percentage point jump, the biggest monthly spike in 22 years, was a statistical anomaly.

Indeed, employers have been steadily shedding jobs for the last three months. Businesses cut 52,000 more workers in May and April than the government first thought, the Labor Department said, casting aside initial estimates that suggested some deceleration.

In the last 12 months, the economy had seen a net gain of only 15,000 jobs, the lowest net increase since November 2003.

In the last 50 years, the economy has entered a recession every time jobs have dropped for six consecutive months.

And most Americans who are still employed earned less money in June than they did a year ago. Wages, which have been steadily shrinking in recent months, took a sharp hit last month, growing at the slowest pace since September 2005.

Among rank-and-file workers, who make up the majority of the nation’s work force, weekly paychecks have grown 2.8 percent in the last 12 months. That was down from 3.2 percent in May and well below the rate of inflation.

Average hourly earnings grew 3.4 percent, the slowest pace since the start of 2006.

McCain’s response to the report — boilerplate Republican nonsense — is equally as illuminating:

“At a time when our small businesses need support from Washington, we cannot raise taxes, increase regulation and isolate ourselves from foreign markets,” Senator John McCain, the Republican candidate, said in a statement. He called for tax relief, job creation, and investment in innovation.

So, workers are hurting so we’ll … help … business…..? And while he speaks of small business, we all know that the businesses most likely to benefit will not be so small.