Political Economy category archive

Running out of persons to lay off:

A separate report from the Labor Department showed initial claims for state unemployment insurance dropped by 13,000 to a seasonally adjusted 623,000 in the week ended May 23, falling for a second straight week.

However, the number of people staying on benefit rolls after drawing an initial week of aid increased 110,000 to a higher-than-forecast 6.79 million in the week ended May 16.

On a possibly brighter note, the same story reports that April durable goods orders were up slightly.

I say “possibly” because these preliminary figures, including the unemployment figures, are often revised a month later–usually in the wrong direction. Follow the link to see what happened to the March durable goods estimate.

Fundamental to this whole mess is thinking of one’s primary residence, not as a place to live, but as an investment. That’s gambling with the grocery money.

Home prices in 20 major metropolitan areas fell more than forecast in March as foreclosures surged, threatening to extend the housing slump.

The S&P/Case-Shiller home-price index decreased 18.7 percent from March 2008, matching the drop in the year ended in February. The measure declined 19 percent in January, the most since data began in 2001.

Record foreclosures are depressing the value of other properties, contributing to a slump in household wealth that is hurting consumer spending and the economy. Still, falling prices and mortgage rates have made homes more affordable, helping to stem the slide in sales, which will eventually help prices stabilize.

Douglas A. McIntyre, writing at 24/7, considers the claim that the S&P data is so old (two months) as to be meaningless:

But, the numbers from March are like canned vegetables. It takes them a long time to spoil. That point was driven home by a study Fitch, the credit ratings agency, is preparing that shows “that between 65% and 75% of modified subprime loans will fall 60-days or more delinquent within 12 months of the loan change.” In other words, even if homeowners are given a second chance to keep their homes and enjoy lower monthly payments, they are prepared to walk away.

The market is looking for ways to claim that housing is finding a bottom and that it is possible that a recovery in home prices in in the wings. While there may be some pick-up in sales in the most depressed markets including Nevada and Florida, there is no sign that prices are rising. Clever buyers are moving in to buy homes in foreclosure, but the prices of these houses are so low that their sales may actually bring down the average price of the homes being sold in those markets.

Bonddad has a great series up about the Federal budget.

As is typical of his posts, there’re lots of facts and almost no editorializing.

Part One.

Part Two.

Part Three.

One thing his statistics show is that, despite the caterwauling, Social Security spending is not a big issue; it’s held pretty steady as a percentage of expenditure.

Medical spending–Medicare and Medicaid–that’s another thing.

He doesn’t editorialize, but I do. We need single payer.

More Americans than forecast filed claims for unemployment insurance last week, and the total number of workers receiving benefits rose to a record, signs the job market continues to weaken even as the economic slump eases.

Initial jobless claims fell by 12,000 to 631,000 in the week ended May 16, from a revised 643,000 the prior week that was higher than initially estimated, the Labor Department said today in Washington. The total number of people collecting benefits rose to 6.66 million, a record reading for a 16th straight week, and a sign companies are still not hiring.

Notice how the revised figures are usually higher than the initial estimates?

They are in the fields where all those unbuilt houses aren’t (not that I’m a big fan of filling fields with houses, but, even so):

Housing starts fell 12.8 percent to an annual rate of 458,000 units last month, the lowest on records dating to January 1959, the Commerce Department said.

The drop reflected a 46.1 percent plunge in groundbreaking activity for multi-family units and suggested homebuilding remains a drag on the economy. Starts for single-family homes, however, rose 2.8 percent, a second straight gain that showed the worst-hit part of the market was stabilizing.

I question whether housing is a drag on the economy. Rather, I think the economy is a drag on housing.

And Wall Street Banks are the deadweight in the drag.

Graph via Andrew Sullivan.

Outfits that depend on volutary contributions, such as churches, are hurting these days.

And the hurt has unexpected side effects. In Virginia:

God may provide, but the state may not when it comes to unemployment benefits for employees laid off by churches, synagogues and religious groups.

(snip)

It was a hard way to learn that under Virginia law, tax exemptions for religious organizations include freedom from paying unemployment taxes. The groups still must pay Social Security and withholding taxes.

SAHW (Stay at home workers):

After hitting a three-month low in the prior week, first-time claims for state unemployment benefits rose due to layoffs in the auto sector, the Labor Department reported Thursday. The number of initial claims in the week ending May 9 rose 32,000 to 637,000.

Oh, wait (emphasis added):

Foreclosure prevention specialists in the area (southeastern Virginia–ed.) said the majority of the clients they see facing foreclosure have been put into that position because of a job loss.

“Very few of the ones we’re seeing now are people who were put into loans they couldn’t afford,” said John Allen, a vice president of The Up Center, a Norfolk organization that provides foreclosure prevention counseling. “It’s almost always job loss, or reduction in hours, or something revolving around that.”

But, after all, they are Wall Street Executives.

They wear expensive suits, look good in meetings, and write nice memos.

They are entitled.

. . . after a year in which Wall Street firms paid $18.4 billion in bonuses while accepting more than $50 billion in government bailouts, many experts say the system may have finally blown itself apart.

“The system is broken,” said Warren Batts, former chief executive of Tupperware Corp., Premark International and Dart Industries who used to sit on the boards of Allstate Corp., Sears, Roebuck and Co. and Sprint. “It needs some guiding principles.”

Without such guideposts, executive pay has run amok. CEOs made 344 times more the average worker in 2007, according to a survey from United for a Fair Economy, which targets economic inequality. That’s up from less than 150-to-one in 1992.

Read the whole thing.

Pop!

Home prices in the U.S. dropped the most on record in the first quarter from a year earlier as banks sold seized homes and foreclosures in California and Florida dominated sales.

The median price fell 14 percent to $169,000, the National Association of Realtors said today. Prices dropped in 134 of 152 metropolitan areas, with the deepest declines in Cape Coral-Ft. Myers, Florida, and the San Francisco and San Jose areas.

What Digby said:

The fiscal zombies said nothing when George W Bush passed out the surplus to all their wealthy friends just 8 years ago and then blindly cheered on an unnecessary, hugely expensive war. No, they waited until the economy was in total meltdown to insist that everyone (but them) needs to “sacrifice.” I don’t know where they get the chutzpah, but it seems to be in endless supply.

Your weekly Presidential address:

Text here.

The credit card banks:

Read more »

FDIC sets up shop in Florida, Because the southeastern banking system is so, you know, healthy.

The Federal Deposit Insurance Corporation (FDIC) today announced it will open a temporary satellite office in Jacksonville, Florida, to manage receiverships and to liquidate assets from failed financial institutions primarily located in the eastern states.

(snip)

Throughout its history, the FDIC has used these offices to keep temporary asset resolution staff closer to the concentration of failed bank assets they oversee. As the work diminishes, the temporary satellite offices are closed.

Follow the links for the full analyses:

Part 1:

GDP is already performing more poorly than the Fed’s stress test.

The worse case scenario for unemployment is the most realistic possibility.

Home prices are already closer to the Fed’s worst case scenario than the median baseline forecast.

Bottom line: the worst case scenario is the most realistic scenario.

Part 2:

Let’s move to the latest report from the Treasury Department. It indicates several problems.

Via Diversity Inc.

New unemployment claims drop to only 601,000 for last week, but the total number of persons collecting benefits continues to set a new record every week.

They are running out of persons to supply-sideline.

Initial jobless claims decreased by 34,000 to 601,000 in the week ended May 2, the fewest since late January, from a revised 635,000 the prior week, the Labor Department said today in Washington. The number of people collecting benefits climbed to 6.35 million the prior week, the 14th consecutive record, showing companies are still not hiring even as staff reductions abate.

John Cole on wanker bankers, Chrysler, and Fiat:

So when you read the bleatings of some hedge fund manager echoed on every wingnut blog, just remember, no laws have been broken, nothing unethical has taken place, and they only have themselves to blame. Which is, of course, why they are squealing so loudly.

And one final thing. I adore hearing about the sanctity of contracts, because it just cracks me up. Where was all this concern about the sanctity of contracts when the entire Republican caucus was trying to destroy every auto union contract out there? Where was this overabiding concern for the sanctity of contracts every time the autoworkers have made concessions the last couple of decades? Why are there hundreds of thousands of lawyers out there spending every day trying to litigate their client out of contracts or trying to litigate more favorable terms for their clients? Just plain silliness.

Robert Reich:

Why, one may ask, is Obama taking on yet another huge fight by taking aim at foreign tax havens? Yes, it’s unfair that multinationals pay an average tax rate of only 2 percent on their foreign revenues, and it’s unfair that some wealthy Americans are avoiding taxes altogether by parking their fortunes abroad. But, hey, these have been true for decades.</blockquote>

Later on in the post, he offers theories on why Mr. Obama is picking this fight. They boil down to health care.

May 5, 2009 | Posted by: Frank | Posted in: Political Economy | Bookmark this post

Pennsylvania has run out of unemployment compensation money, because so many persons have been supply-sidelined.

It’s now borrowing money to pay unemployment benefits.

Via Susie.