In the week ending May 9, the advance figure for seasonally adjusted initial claims was 637,000, an increase of 32,000 from the previous week’s revised figure of 605,000. The 4-week moving average was 630,500, an increase of 6,000 from the previous week’s revised average of 624,500.
The advance number for seasonally adjusted insured unemployment during the week ending May 2 was 6,560,000, an increase of 202,000 from the preceding week’s revised level of 6,358,000. The 4-week moving average was 6,337,250, an increase of 128,750 from the preceding week’s revised average of 6,208,500.
A few things to note regarding this data:
The initial claims number, while high, is roughly 30K less than the peak number (for this recession) that was established a few weeks ago
The continued claims of 6.56M is a new record
If GM goes into bankruptcy, it is reasonable to expect that initial claims will remain high even if other areas of the job market improve slightly
If initial claims remain high, there will be a cascade effect to other areas of the economy – namely retail.
Bottom line: The “green shoots” of hope seen by the Federal Reserve are long since gone. While the economy may be in a bottoming process, we are far from being in a good position.
If one listens to the press, all of a sudden the economic world that was in total free fall all of two months ago is suddenly not that bad. So, which is it? Is the world on the verge of total economic collapse or are we all living in a world where we just might make it out alive.
I don’t know, I’m not an economist, but I will point out a few things and let you decide.
Foreclosures continue to rise while property values continue to plummet. Not fall, plummet. Some areas of the nation are seeing property values falling by nearly half.
General Growth Properties, the second largest shopping mall operator in the world, declared bankruptcy due to unmanageable debt and a loss of contracts.
Venture Capital investments are at their lowest in 12 years, this means new ideas are now being fueled… new businesses are not starting….
The US has lost 4,197,371 jobs since February 2008 and the layoffs continue in waves
Maybe Bernanke and company is looking at information unavailable to the rest of the public but all that I see is negative. I want to see true signs of recovery, I want to see that the nation – and the world – is turning around but I simply don’t. I simply cannot believe that things have turned for the positive. If the banks were strong – truly strong – the stress test results would be released without debate as to how to do so. If things were bottoming – let alone growing – the layoffs would not be continuing at such a large clip.
Bottom line, for me, I think the worst is yet to come. GM and/or Chrysler will go into bankruptcy, major banks will go under or be nationalized, and unemployment will continue to rise – I still believe 10% is going to happen this year.
While I had originally doubted Nouriel Roubini, I have come to believe he is one of the very few economists who continues to publicly state the true market conditions. He holds no punches, he appears to have no fear at what others think about his predictions and… he is not swayed by the political landscape.
Today, Mr. Roubini sends another warning:
“The stock market is a bit ahead of the real macroeconomic and financial news,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, said in an interview with Bloomberg Television in London today. “We’ll have some major banks going belly up that will need to be taken over.”
..
Roubini, who predicts loan and securities losses in the U.S. will reach $3.6 trillion, said the stress tests will reveal that some banks need to be taken over and have their good and bad assets separated before being sold to the private sector. He didn’t name which companies he thought would need to be rescued.
What will the U.S. Bank Stress test show? I have a feeling that Roubini is on target with his assessment that some major banks will go bell-up. That is why when I hear an organization, such as Citibank, say they’ve suddenly become profitable, in the hardest of economic conditions the market has witnessed in years, after over a year of unprofitably just doesn’t seem right. It’s nearly impossible, and I believe the stress test will show just how vulnerable the institution (and others) really are.
It has often been said the Stock market anticipates what conditions will be like 6 months from now. If that is the case, the market is being overly optimistic right now. Major banks need to be addressed, unemployment will continue to rise during the year and retail sales are nowhere near recovery.
I’m not trying to be to be negative, people need to be realistic about what we are facing.
This may sound like a foolish question, but isn’t failure a part of capitalism – not the end of capitalism?
Since the downturn of the economy, public anger towards corporations has grown quite noticeably. While the public should be, and has the right to be, angered at companies that accepted “emergency” funding, yet continued to pay out bonuses, there are a number of companies who are the target of public ire simply because they… well… are large and grouped into industries that are currently under stress.
A number of news commentators, politicians, and bloggers worldwide have made comments like:
“This is a failure of extreme capitalism” – Prime Minister Kevin Rudd
“These events are signposts in the historic failure of American and world capitalism” – Barry Gray
“Capitalism is a failure – what the bailout means for working people” - Workers International League
Yes, the world is in the throws of a severe economic recession. Individuals worldwide have witnessed their net worths shrink dramatically. Jobs, even for the most qualified of individuals, are hard to come by. Companies that managed to survive the great depression are now facing extinction.
Not to sound crass, but isn’t this all part of the cycle?
Think about the season cycle for a moment. You have spring and summer, providing a rebirth and growth period, followed by fall and winter, which leads to death and the void of life. The pulse of a capitalist society follows the same patter. Contraction and Expansion. The process helps remove the weakness, allowing for a stronger system to emerge on the other side.
In no way am I saying it is easy to experience this economic pain, it is not. While not unemployed, I have suffered financial losses greater than I had ever expected. Frankly, losses that will take 10 years to simply break even if the market were to turn today. Am I happy about this? No. If I wish to live in a capitalist society, these are the risks I have to accept. But, really, what other options exist?
Socialism – Look at the socialist leaning economies in the world and one will see the same economic hardship, if not more severe.
Communism – Distinctly different than Socialism, but also a political and economic failure.
But why do I want to live in a capitalist society? Flexibility. Hope. Possibility.
While I understand the difficulty facing anyone wishing to make a life in a capitalist society, I also know options and the possibility of success is less in a socialist or communist society. I’m not saying it’s perfect, it’s not, but it sure is better than the other options on the table as of right now.
Gordon Brown, the Prime Minister of the United Kingdom recently said “the economic crisis demonstrates the failure of laissez faire capitalism.”
Really?
Maybe the failure isn’t capitalism, maybe the failure is regulation and political intervention. Had political leaders truly paid attention to auditors several years ago, the collapse of Frannie and Freddie would have never happened. Instead, people simply were looking for how they could profit (financially and politically).
Should the public be pissed because 165 million in bonuses are being paid out by AIG? Damn right. Should there be a backlash about GM being “bailed out” while grossly mismanaging their business for decades on end? Yes. Should we be mad about that the government is handing blank checks to banks while not providing insight as to where the money is going. Yes. Should a company chastised simply because they are big? No. Should we over-regulate because of the current crisis? No. Should we declare capitalism dead? No.
The system can be, and should be, improved but we should not throw the baby out with the bathwater. The experiment known as the United States has been a resounding success, politically and economically, regardless of our downfalls thus far (and we’ve had many, many downfalls). Now is the time to evaluate what works, what doesn’t, and make the changes that are needed to continue growing.
Since the second half of last year the stock market has been in a free fall and just about every economic forecast paints a picture of doom. Oh, yea, and there is enough collective data to show the United States is in the worst recession since World War II.
Confronting misgivings, even in his own party, President Barack Obama mounted a stout defense of his blueprint to overhaul the economy Thursday, declaring the national crisis is “not as bad as we think” and his plans will speed recovery.
Challenged to provide encouragement as the nation’s “confidence builder in chief,” Obama said Americans shouldn’t be whipsawed by bursts of either bad or good news and he was “highly optimistic” about the long term.
Just to recap how things are “not as bad as we think”…
The government has passed two bail-outs – one for $700B, one for $787B
GM and Chrysler are on the brink, all currently getting government funds to keep them operating, all face the worst sales market in 40 years
The credit market is close to frozen, people – let alone companies – cannot obtain credit
Year over year Retail Sales are down 12%, the most in the last 20+ years
Foreclosure rates for U.S. houses are at historic highs
Consumer Confidence is at historic lows
But no, it’s not that bad…
The reality, assuming we are all operating in reality, all points to a true economic meltdown that the world has not experienced in over two generations. There is no question about it, things ARE as bad as we think. The question is will they continue to get worse.
Posted (Van Santos) in Barack Obama on March-9-2009
I’m starting to have issues with the language that President Obama is using while discussing the financial crisis. Specifically, I do not care for the fact that the President continues to try to place the blame on his predecessor.
Let’s be very, very clear here – the current recession and financial crisis started under President Bush and his administration. There was very little the Bush administration did to make the situation any better or worse. The only option they provided was a $700 Billion TARP package that was mismanaged, and continues to be. There is no doubt or question about that, however, every time President Obama makes a decision about economic policy he is taking ownership of the problem. Every decision his administration is making has a direct impact on the current economic environment.
That is speech like the following can only go on for so long:
As soon as I took office, I asked this Congress to send me a recovery plan by President’s Day that would put people back to work and put money in their pockets. Not because I believe in bigger government – I don’t. Not because I’m not mindful of the massive debt we’ve inherited – I am. I called for action because the failure to do so would have cost more jobs and caused more hardships.
“I did think it might be useful to point out that it wasn’t under me that we started buying a bunch of shares of banks. It wasn’t on my watch. And it wasn’t on my watch that we passed a massive new entitlement -– the prescription drug plan — without a source of funding. And so I think it’s important just to note when you start hearing folks throw these words around that we’ve actually been operating in a way that has been entirely consistent with free-market principles and that some of the same folks who are throwing the word ’socialist’ around can’t say the same.”
The American public will only accept the “it’s not my fault” cry for so long. Eventually the populous will start pointing to the impact of the administration and say “while you didn’t start it, you’ve made it worse.” So when does this become Presidnet Obama’s mess? Ever day that passes.
It’s time for President Obama to man up and take ownership of the problem regardless of who created is to blame or at fault. The President needs to stop attempting justify his actions by saying “well, others before me did so therefore I am too”.
The President needs to do what he was elected to do – lead.
Anyone who even casually follows the financial market is well aware that today a horrific day in the Stock market. While the Economy (and stock market) experienced a large amount of pain over the last 6 months, today appeared to be even more painful for a number of reasons.
Despite massive restructuring efforts, despite the loans provided by the government, and despite everything the company has said previously, General Motors finally admitted what the rest of the world already knew – the end of the road is close for General Motors.
The corporation’s recurring losses from operations, stockholders’ deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern.
Having experience in the world of audit, this is the professional way of saying “Bankruptcy is going to happen”.
The major question that is on the minds of most is how this bankruptcy take place? Will the government act as the funding institution, propping up General Motors during the restructuring process, or will GM face a massive liquidation event pushing the into the pages of oblivion?
President Obama previously stated that he will not allow the American auto industry to fail, and Congress has already provided funding to GM and Chrysler, so what wouldn’t the Government act as the financier for a GM bankruptcy?
Maybe government officials would fear the backlash from the general public.
The world will not end when General Motors goes bankrupt, but it will be painful. Other companies will suffer the same fate as a result and the stock market will whipsaw with uncertainty but we will all survive. Politicians, however, may not survive the next round of elections if huge amounts of public funding are dedicated to propping up a company that has no hope of survival.
What does this say to you? The majority risk really falls within 6 institutions. Unfortunately, institutions 2 and 3 are suffering the most on this list.
This one is HUGE. A record number of mortgage holders, 5.4 million, are delinquent in with their monthly payments.
The Mortgage Bankers Association said Thursday the percentage of loans at least a month overdue or in foreclosure was up from 10% in the July-September quarter and up from about 8% a year earlier.
The scary part of this information, aside from the drastic rise, is the location(s) of the delinquent mortgages – Louisiana, New York, Georgia, Texas and Mississippi. The mortgage crisis is spreading beyond the borders of California, Florida, Arizona and Nevada. What was once a localized but highly publicized event is truly becoming a nationwide crisis.
I never thought the day would come where Citibank, once the largest bank in the world, dropped below the one dollar mark today. While this not “economic” news it is important none the less as the price is a psychological indicator – the stock market believes that Citibank will not survive the financial meltdown.
And what does tomorrow bring?
Pundits and market watchers expect Friday to be an extremely volatile day – at 7:30 AM the new Unemployment rate will be announced. Economists predict unemployment to come in at 7.9%. Lower and the market may celebrate. Higher and the day may see a sell off at the open.
No one knows what awaits for us tomorrow, but it sure will be fun to watch…
The person Treasury Secretary Timothy Geithner wanted as his chief deputy withdrew from consideration Thursday, dealing a setback to the understaffed agency as it struggles to address the worst financial crisis in decades.
Annette Nazareth, a former senior staffer and commissioner with the Securities and Exchange Commission, made “a personal decision” to withdraw from the process, according to a person familiar with her decision.
The decision followed more than a month of intense scrutiny of her taxes and multiple interviews. No tax problems or other issues arose during Nazareth’s vetting, said the person, who requested anonymity because Geithner’s choice of Nazareth was never announced officially.
So, did Congress find something in her past or did she simply get fed up of the inquisition?
Driving in today I heard that the latest GDP numbers for the 4th quarter and it turns out that the U.S. economy contracted 6.2% in the last three months of 2008. This ends up being significantly weaker than the 3.8% originally predicted at the beginning of the month.
Not only this is the worst GDP drop in 25 years, but the magnitude of the revision is truly astounding. When one looks at the unemployment numbers and the large waves of layoffs in the last two months, Q1/2009 could easily be on par – if not worse than – Q4/2008.
Economic Musings – International
Two days ago I commented that people need to look beyond our boarders for additional indicators of the economic climate. I specifically singled out Japan and Germany. Both countries saw significant contraction in recent months, but what about other countries?
By now it should be clear that this is a world wide recession and no country is safe.
Don’t understand the credit crisis? Watch this.
I know a number of people who do not fully understand the credit crisis and how the economies of the world ended up where they are today. Here is an outstanding cartoon that manages to explain a rather complicated situation in a very simple, yet effective method.
This is a must watch!
Civil unrest and government falter in other areas of the world…
It’s the weekend and I need a break – time to get away from the stresses of work, the world, and life in general.
I’ll be having dinner with my Parents on Sunday, which will be enjoyable, and I expect to watch The Curious Case of Benjamin Button as well.
There will be no cooking, exotic or otherwise… though I do have a few new things I want to try. One specifically is the Paprika Chicken Roast over @ ReTorte! Wandering Coyote really has some good food selections.
Finally, my review of The Prodigy’s Invaders Must Die will come this evening…
Posted (Van Santos) in Business on February-25-2009
One short term benefit to being a consumer based economy is not being on the supply side when the sudden changes in economic conditions take place. To get a clearer picture of the economic reality, a picture that is not only focused on the pain the U.S. economy is facing, look beyond our borders to the countries that count on exporting goods in order to sustain economic growth.
The second largest economy in the world contracted at an annual pace of 12.7% last quarter. By the very loose definition of an economic depression (10% or greater of negative growth), the Japanese are facing what the world fears most. The contraction was accompanied by a decrease in exports by 45.7% from a year earlier, and a 31.7% decrease of imports.
This suggests three very obvious things – The Japanese consumer is not spending, the countries Japan exports to are not purchasing goods, and result further contraction is highly likely.
While still low, it would be reasonable for unemployment to start rising in Japan as companies, mainly manufacturing, begin slowing output or laying off staff in order to “right size” to the challenging environment. Toyota, a company known from not laying off staff during rough economic periods, will begin offering buyouts to employees. It’s just a matter of time before Honda and Nissan follow suit.
Germany, Europe’s largest economy, also fell victim to a decline in exports. As a result, the country was the largest economic contraction in about twenty-two years.
While not as drastic as the numbers out of Japan, Germany’s decrease in exports by 7.6% is quite significant considering most look at the German economy as the beating heart of the Euro-zone. Companies are halting production, laying off workers, and preparing for a significant decline in growth as economists expect the German economy to contract by 2.25% this year.
Seems to be a common theme, no?
Looking at this information makes me wonder…
So, have I stopped purchasing?
Hell yes!
I cannot even begin to remember when I spent a significant amount on an item that would be considered “discretionary”. If I really put my mind to it, I would say last December I spend $150 on 3 pairs of Wool pants. Everything else I purchase would fall into the category of household goods (weekly groceries) or entertainment costs (weekend brunch or a movie). Any excess that I have goes immediately to paying off debts as I fear about my future, and I fear about my ability to provide for myself as I look at the events unfold around me.
While the U.S. economy is consumer based, we can see that the consumer – namely you and I – have stopped spending on goods. As a result, we are no longer importing goods from our trade partners. Once the economic data coming from Japan and German begin to stabilize, and only once the data stabilizes, will the world truly know economic conditions are beginning to improve.
In their economic projections for the January FOMC meeting, monetary policy makers substantially marked down their forecasts for real GDP this year relative to the forecasts they had prepared in October. The central tendency of their most recent projections for real GDP implies a decline of 1/2 percent to 1-1/4 percent over the four quarters of 2009. These projections reflect an expected significant contraction in the first half of this year combined with an anticipated gradual resumption of growth in the second half.
Federal Reserve policymakers continued to expect moderate expansion next year, with a central tendency of 2-1/2 percent to 3-1/4 percent growth in real GDP and a decline in the unemployment rate by the end of 2010 to a central tendency of 8 percent to 8-1/4 percent.
If actions taken by the Administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability–and only if that is the case, in my view–there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.
With the inconsistent message coming out of the last two administrations regarding the economic climate, I’m unsure how to take Bernanke’s comments. Is he implying that, in the best of all possible worlds, if everything good that can happen does, the economy will start to grown once again at the end of this year?
The world we live in today has very, very pessimistic economic data in every category – none of which points to a near term recovery – so what information is Bernanke (and the Fed) looking at to draw this conclusion? Bernanke does not appear to be a person who would make a statement in order to calm the stock markets, so this just makes me wonder what else is going on that we are unaware of.
One thing I fear about the current economy, and the attempts to move a recovery forward is President Obama’s pledge to cut the federal deficit by roughly half over the next four years.
No detailed approach has yet to be presented to the public, but what little information that is known points to a significant cut in defense spending (ending/scaling back the war in Iraq) and raising taxes on the nations richest.
What bothers me about the heavier taxation is the potential effect on the recovering economy. During the Great Depression, Hoover raised taxes as an attempt to balance the budget. This decision only lengthened, if not strengthened, the economic downturn. While one would not expect the top marginal rate to rise to great depression levels, it still is a dangerous line to walk – less disposable income leads to less economic activity.
“We don’t need majority ownership to work with the banks,” Bernanke said today. “We have very strong supervisory oversight. We can work with them now to do whatever is necessary.”
Translation: There is no need to nationalize banks.
That is what the administration is saying right now, but as this entire situation has taught economists everywhere this is an ever-changing situation. What is workable today my not be so tomorrow.
With the President speaking this evening, and Treasure Secretary Tim Geithner presenting more information on the banking plan tomorrow, the next few days will be very interesting to watch.
2/24 – 8:17PM UPDATE
Calculated Risk has an interesting question/point on this very subject.
If the banks are seriously insolvent, this sounds like the zombie bank approach and rewards existing shareholders at the expense of taxpayers. If the banks are not seriously insolvent, this is a reasonable approach. But how does Bernanke know the solution before the data is available from the stress tests?
So how can Bernanke say that no nationalization will take place if the data to determine so has not yet been established? Makes one wonder just a bit more, doesn’t it? I want to know what Bernanke knows that he is not saying…and if he is not syaing it, why is he withholding the information? It’s clearly positive if he can determine that no nationalization is needed.