Latest Beige Book outlook not so bright

The Great Recession, the near-depression, economic downturn — whatever you want to label the economy of the last years with, it all comes down to it’s not good, hasn’t really gotten appreciably better for Main Street and doesn’t really seem like tangible recovery is even visible on the horizon. So it’s another fall of keeping the chin up and tightening the belt a little bit more once again.

From the link:

The mixed picture is in line with government data released last month that showed U.S. gross domestic product, the broadest measure of economic activity, was much weaker in the second quarter than previously estimated.

The nation’s GDP was revised sharply lower to an annual growth rate of 1.6% in the three months ending in June. The initial reading had been for a 2.4% growth rate in the period.

Fed chairman Ben Bernanke acknowledged in a speech late last month that the U.S. economic recovery has lost considerable steam. But he said the central bank is prepared to use “unconventional measures” to boost the economy if the outlook were to “deteriorate significantly.”

In its Aug. 10 policy statement, the Fed announced plans last month to begin reinvesting proceeds from securities in its $2 trillion portfolio in to U.S. Treasurys. The central bank had bought billions worth of government debt two years ago to keep interest rates low on home and other consumer loans. But minuets from the August meeting subsequently showed that Fed officials were unusually divided over the policy.

Foreclosures still a problem

To join my previous post on the sluggish nature of the current economic recovery, here’s more dark gray news on foreclosures …

From the link:

The latest foreclosure numbers carried a mixed message: They’re up 3.6% from the month before but down 9.7% from 12 months earlier.

In July there were more than 325,000 foreclosure filings — including notices of default, auctions notices and bank repossessions. That is the 17th month in a row total filings exceeded 300,000, said RealtyTrac’s CEO, James Saccacio.

“Declines in new default notices, which were down on a year-over-year basis for the sixth straight month in July,” he said, “have been offset by near-record levels of bank repossessions, which increased on a year-over-year basis for the eighth straight month.”

Economic recovery weakening …

… per the Fed. Not good news out there at all, and a lot of us are really feeling it right now.

From the link:

The U.S. economic recovery is weakening, the Federal Reserve warned at the conclusion of its meeting Tuesday, its most bearish outlook in more than a year.

“The pace of recovery in output and employment has slowed in recent months,” the Fed said in its statement. It said while it still expects the economy to grow, the improvement will be “more modest in the near term than had been anticipated.”

Per Fed, economic recovery slowing

This is very easy news to believe. Things are still pretty rough out there.

From the link:

Federal Reserve policymakers, acknowledging a slowing in the economic recovery at their meeting in late June, began to consider the possibility of providing additional stimulus if growth fell sharply — a possibility that has become all the more real as signs of weakness have piled up.

Interest rates are going to stay low

In other words, move along everyone — there’s nothing to see here …

From the link:

Jitters that financial strains may derail the U.S. economic recovery mean the Federal Reserve will be in no rush to end its ultra-low interest rates, comments by officials of the U.S. central bank suggested on Wednesday.

One senior Fed official went as far as acknowledging that falling inflation could spur the central bank to further ease financial conditions, and another policy maker would not rule out additional measures to stimulate growth.

When asked whether lower inflation would prompt the Fed to try to push borrowing costs even lower, Atlanta Federal Reserve President Dennis Lockhart told a Rotary Club audience: “It’s appropriate to think about what we would do under a deflationary scenario. At this point, no specific planning in my view is occurring but discussion in all likelihood will be on the agenda.”

Line the nest, this recovery is gonna be slow

Real slow.

From the link:

A gauge of future economic activity rose 0.4% in May, signaling slow growth for the U.S. economy in the summer and fall.

The private Conference Board’s leading economic index is designed to forecast economic activity in the next three to six months.

Economists had expected a reading of 0.5% in May.

Recovery still hasn’t reached Main Street

I’m sure this is not news to all of us Main Streeters out there. The stories I’ve been hearing from small business owners are just incredible. People with impeccable credit histories having credit lines slashed to almost nothing, companies offering payment plans never before considered only to find the customers still unable to meet the soft terms and enough accounting tricks to try and deal with the facts on the ground to make your head spin. Nope, the recovery still hasn’t made it to Main Street.

From the link:

The economy may be showing halting signs of recovery, but the turnaround hasn’t reached Main Street yet: A pair of recent small business surveys found that most owners are skeptical or downright gloomy about their business prospects this year.

“Something isn’t sitting well with small business owners,” Bill Dunkelberg, chief economist of the National Federation of Independent Business, said in a written statement accompanying the latest edition of his organization’s monthly “Small Business Optimism” report. “Poor sales and uncertainty continue to overwhelm any other good news about the economy.”

Capital expenditures remain near record lows, sales are still weak, and credit lines are hard to find, according to the around 950 business owners NFIB surveyed in March. While job cuts have slowed, few businesses say they plan to hire new workers within the next three months.

The state of the recession

So-so at best. By all, or a least most, accounts the national recession is over and recovery, however slow, is going on right now. Break that national figure down a bit and the picture changes dramatically. Two-thirds of all states are still in a recession. That’s a lot of people who just get frustrated and angry when told things have hit bottom and are now getting better. For a lot of Americans things are not getting any better just yet. And Nevada is alone as the the state with a still-shrinking economy.

From the link:

The national recession may be over, but not everyone feels the change. Some industries and regions continue to suffer. The tepid 3% pace of growth in this recovery means no rising tide lifting all boats.

And here’s a handy chart outlining who’s still feeling the pain:

Americans richer — on paper

As far as this goes, it’s good news. It’s also a nice reminder that a lot of personal economic woes are purely paper losses (and then gains when things start rebounding like right now.) Not to understate the real pain being felt out there, but when the media starts tossing gigantic numbers around it’s always a good idea to keep a little perspective.

From the first link:

Americans got wealthier for a second straight quarter in the fall, thanks to gains in stock investments and home values.

Net worth — the value of assets such as homes, bank accounts and investments, minus debts like mortgages and credit cards — rose 5% from the second quarter to $53.4 trillion, the Federal Reserve said Thursday.

Yet even with that gain, Americans’ net worth remains far below the revised peak of $64.5 trillion reached before the recession began. That underscores the vast loss of wealth over the past two years. Net worth would need to rise an additional 21% just to return to its pre-recession peak.

And many analysts don’t expect a repeat of the strong second- and third-quarter gains anytime soon. That’s why Scott Hoyt, senior director of consumer economics at Moody’s Economy.com, thinks household wealth won’t match its pre-recession peak until about 2012.

Is the stimulus creating jobs?

Depends on who you ask. From this desk chair it doesn’t look like it’s doing all that much, but these numbers do have a way of sneaking up on you.

From the link:

Is the largest one-time economic recovery effort in U.S. history creating jobs?

According to new reports from governors across the country, it is. Republicans in Congress say it’s not, and the debate is getting louder.

Jobs aren’t recovering with economy

Not exciting news, and the title’s probably a little bit misleading since it should read something closer to “don’t expect jobs to recover along with the economy once the economy really starts recovering.” Or something along those sobering lines.

From the link:

The mood regarding the U.S. economy may be inching, ever so slowly, toward optimism. But don’t expect to see much improvement on the jobs front anytime soon. The economy’s following a script for a jobless recovery, and unemployment is likely to stay high, if not get slightly worse.The Congressional Budget Office painted a worsening picture for joblessness on Tuesday: The CBO sees unemployment peaking at 10.4% next year from an average of 9.3% this year, before it falls to 9.1% in 2011.

So how can there be a recovery without job growth to go with it?

To start, companies were unusually quick on the trigger initiating massive layoffs during this downturn. But they’re unlikely to be equally zealous about hiring people back, especially since productivity is so high right now. The Labor Department reported that non-farm productivity grew at a 6.4% annual rate in the second quarter, the largest gain since the third quarter of 2003.

US companies are cash-rich

And all this mattress stuffing isn’t doing much for the economy. The free market needs liquidity or things tend to stagnate.

From the link:

American companies are now sitting on record mountains of cash in an indication of deep worries about the economy’s future.Even though analysts forecast a return to U.S. economic growth by the third quarter, companies have yet to show any major signs of rehiring or spending.

And with consumers also hoarding cash at near record levels, a cautious stance by companies could add to worries about the sustainability of an economic recovery.

CPAs becoming optimistic

Doesn’t mean a whole lot in terms of real world affect, but it is interesting to see how financial execs see the current state of the economy. (Hint: their sector has a huge influence on who’s wearing rose-tinted glasses and who isn’t.) I have a suspicion some of those optimists are feeling better in order to fight off the fatigue of this recessionary beatdown.

From the link:

 Heightened optimism among CPA financial executives seems to indicate the worst of the recession is in the past, but the consensus is growing that the U.S. economy is still a ways off from achieving a full recovery. While optimism about the economy continued to improve and spread across most industries in the third quarter, the percentage of executives who don’t see a recovery beginning until at least the second half of 2010 increased substantially (27% vs. 43%) from the previous quarter, according to a survey released Wednesday.

 When asked about the economic outlook for their own organizations, optimists outnumbered pessimists for the first time since the third quarter of 2008, according to results from the Business & Industry Economic Outlook Survey Q3 2009, conducted by the AICPA and the University of North Carolina’s Kenan-Flagler Business School. About 38% of respondents were optimistic or very optimistic about the economic prospects for their organization over the next 12 months, while 29% were very pessimistic or pessimistic. Thirty-three percent were neutral. Respondents also were more optimistic about their own organizations than about the U.S. economy as a whole (38% vs. 26%), continuing the trend seen over the past two years.

 Although optimism was more widespread than in previous surveys, it was not evenly distributed across all industries. Respondents from professional services and technology organizations see a brighter outlook for the upcoming year, with 49% and 61%, respectively, reporting they’re optimistic, compared with their colleagues in real estate and construction, who were 29% and 28% optimistic, respectively.

More bad housing news

Any economic recovery is still a long ways from Main Street. The worst news from this mortgage report is a third of the new foreclosures were on prime fixed loans.

From the link:

An industry group says a record of more than 13 percent of American homeowners with a mortgage are either behind on their payments or in foreclosure as the recession throws more people out of work.

Economic recovery alphabet soup

As in will the recovery be “v,” “u” or “w” shaped.

Or maybe the whole thing is more of a big “o” since the economy runs in cycles.

From the link:

Typically, sharp downturns like the current one yield equally rapid, or V-shaped, upswings. But the worst recession since the Great Depression has been anything but typical, with housing and credit markets devastated. In a USA TODAY survey, 63% of economists said the recovery will be slow and gradual, or U-shaped.

Yet 37% said it will be moderate or fast. And a smattering of experts say the rebound will look like a W, with a precarious economy sliding back into recession before turning around for good. USA TODAY presents the case for each scenario: