David Kirkpatrick

September 10, 2010

A glimmer of economic hope …

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 12:33 pm

… new jobless benefits claims down. Of course with this unemployment there’s just not that many jobs to lose thusly creating the newly jobless.

Advertisements

September 9, 2010

Latest Beige Book outlook not so bright

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 11:15 am

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.

September 3, 2010

Christina Romer on solving the current level of unemployment

Short version? Cut taxes and crank up spending to give the economy a boost.

August 31, 2010

Bank lending important to small business

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:37 pm

Much more important than expected in terms of financing small business. The total credit freeze when the financial crisis hit hurt everyone, but the ongoing credit crunch on small businesses and entrepreneurs may be a fairly big piece of the slow economic recovery puzzle.

From the link:

Small businesses are more sensitive to the contraction of bank lending than previously thought, and the conventional wisdom about how small businesses finance themselves may be hogwash, according to a new working paper from the National Bureau of Economic Research.

The paper, “The Capital Structure Decisions of New Firms,” found that newly created firms rely heavily on “outside” debt financing, such as owner-backed loans, business bank loans, and business credit lines. The average amount of bank financing is seven times greater than the average amount of
“insider”-financed debt — money from family members and personal networks of the owner. Those groups were previously thought to be the primary providers of fuel for start-ups.

August 30, 2010

Job market, other indicators weak — double dip recession on the horizon?

Looks like not if the Fed can help it. This is likely to be a week full of not so good economic news, and if that scenario comes to pass there’ll be a lot of talk about a “double dip” recession.  And make no mistake, the talk will be justified. I’m not sure what fiscal tools Bernanke has left in the box, but there seems to be agreement that he’ll go more chainsaw and less scalpel to avoid a double-dipper. I guess we’ll see …

From the link:

With little support in Congress for a renewed burst of government spending, the burden of rescuing a lagging recovery falls upon the nation’s central bank. The Fed already has kept its benchmark lending rate near zero for almost two years, and has tried to further loosen credit via unusual asset purchases, known as “quantitative easing.” In a speech Friday, Bernanke said the Fed would take additional “unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”

He told an audience of central bankers in Jackson Hole, Wyo., that the Fed could spur growth by:

•Expanding its $2 trillion balance sheet with additional purchases of long-term securities.

•Announcing plans to keep its benchmark interest rate near zero for “a longer period than is currently priced into the markets.”

•Or reducing the minuscule interest banks earn on deposits with the central bank.

Bernanke said the Fed must balance the benefits of employing unconventional monetary policy tools against their costs. Overly aggressive action could raise doubts that the Fed would be able to unwind its extraordinary assistance once the economy recovers.

August 25, 2010

More economic gloom …

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:33 pm

… home sales at lowest point since 1995.

August 12, 2010

Foreclosures still a problem

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 3:04 pm

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 …

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 2:23 am

… 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.”

August 2, 2010

The Great Recession, animated

A chilling look at unemployment from January 2007 to May 2010.

July 15, 2010

Per Fed, economic recovery slowing

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 1:40 pm

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.

July 14, 2010

How banks are damaging small business and the economy

This ought to be sobering news for anyone still fretting over the state of the economy and why Main Street isn’t feeling anything close to a recovery right now.

From the link:

In the last two years, $40 billion worth of loans to small businesses have evaporated, and correcting the problem should be “front and center among our current policy challenges,” Ben Bernanke, chairman of the Federal Reserve, said in a speech Monday.

Loans to small businesses dropped from more than $710 billion in the second quarter of 2008 to less than $670 billion in the first quarter of 2010, according to bank financial reports submitted to the Federal Financial Institutions Examination Council.

Looking at these two reasons for the dramatic drop in business credit the first certainly has a role, but the second is the actual killer. I know of many small businesses that would happily take on new debt but can’t because their credit lines were slashed to the bone (sometimes for no discernible reason other than the overall economy was bad) and haven’t seen that credit flexibility return to this day.

He cited weaker demand from Main Street businesses worried about taking on more debt during tough times, “deterioration in the financial condition of small businesses during the economic downturn,” and a lack of supply of available credit.

“Clearly, though, to support the recovery, we need to find ways to ensure that creditworthy borrowers have access to needed loans,” Bernanke said.

July 9, 2010

Hayek v. Keynes

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 1:26 pm

From today’s Cato dispatch and hot from the inbox:

The Great Debate Is Still Hayek vs. Keynes What is most likely to pull the economy out of the Great Recession: Keynesian reliance on government spending or Hayek’s solution of a reinvigorated private sector and global trading system? The debate today mirrors the one that occurred during the Great Depression, as Cato Senior Fellow Gerald P. O’Driscoll Jr. writes in the Wall Street Journal:

Is all spending equally productive, or should government policies aim to stimulate private investment? If the latter, then Mr. Obama is following in FDR’s footsteps and impeding recovery. He does so by demonizing business and creating regime uncertainty through new regulations and costly programs. In this he follows neither Hayek nor Keynes, since creating a lack of confidence is considered destructive by both.

July 8, 2010

International Monetary Fund sees better than expected 2010 growth

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 6:18 pm

Somewhat encouraging news, but the reality on the ground is still very grim and I’m guessing will get worse before it improves.

From the link:

The International Monetary Fund raised its forecast for global growth this year, reflecting a stronger-than-expected first half, while warning that financial- market turmoil has increased the risks to the recovery.

The world economy will expand 4.6 percent in 2010, the biggest gain since 2007, compared with an April projection of 4.2 percent, the Washington-based fund said in revisions yesterday to its World Economic Outlook. Growth next year is projected to be 4.3 percent, unchanged from the April forecast.

Canada and the U.S. are leading advanced economies out of the worst recession since World War II, trailed by euro-area countries that need additional measures to boost confidence in their banks, the fund said. Faster expansions in Brazil, China and India are helping to protect the global recovery as a sovereign-debt crisis weighs on Europe, the IMF said.

“The overarching policy challenge is to restore financial- market confidence without choking the recovery,” the IMF report said. “The new forecasts hinge on implementation of policies to rebuild confidence and stability, particularly in the euro area.”

June 1, 2010

The recession and the unemployment benchmark

The question is did the recession push the unemployment benchmark to around seven percent, and if so will the Fed do damage to an already fragile economy by sticking with the previous benchmark of around five percent.

Certainly food for economic thought.

From the link:

Federal Reserve policy makers say full employment means a long-term jobless rate between 5 percent and 5.3 percent. Some of the most influential economists say they’re wrong.

Dean Maki at Barclays Capital, 2006 Nobel Prize-winner Edmund Phelps and Bank of America-Merrill Lynch’s Ethan Harris estimate the worst financial crisis since the Great Depression has pushed the so-called natural rate of unemployment to between 6.3 percent and 7.5 percent. Unless the Fed accepts that more Americans will be permanently out of work, the central bank may spur inflation by waiting too long to raise its benchmark rate from a record low, said Maki, Barclays’ chief U.S. economist and the most accurate forecaster in a December 2009 Bloomberg News survey.

May 25, 2010

This does not help …

… everyone out there still dealing with a rough economic situation.

From the link:

Led by increases in prices for meat and dairy products, the overall cost of items in the FOX Business shopping cart rose sharply in April — the sixth time food basket prices have increased in the last seven months.

The April increase — 56 cents, or 0.8% — was the largest month-month jump since August 2008.

May 14, 2010

Good news everyone, unemployment is rising

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 5:40 pm

Here’s the story behind that counterintuitive header:

It sounds dreadful. After drifting down consistently since last fall, the unemployment rate has suddenly shot up again, from 9.7 percent in March to 9.9 percent in April. But don’t despair: A rising unemployment rate is actually one of the best signs yet that the economy is bouncing back.

The unemployment rate rose for the right reason. Instead of shedding jobs, employers added 290,000 jobs in April, the strongest showing since 2007. The reason the unemployment rate went up is that a lot more people are suddenly looking for work. The government said that the labor force swelled by 805,000 people in April. That’s more than three times the number of new jobs, so the proportion of people looking for a job but unable to find one went up. Still, that big increase in the labor force marks an important shift in sentiment among people on the fringes of the economy.

March 25, 2010

Corporate belt tightening led to cash reserves

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 4:38 pm

Of course all this liquidity was wrung out of Main Street and the lifeblood of the economy — the workforce.

From the link:

The brutal recession has left many American families, small businesses and state and local governments in financial ruin or teetering on the brink.

But it’s a much different story for the nation’s biggest companies. Many have emerged from the economy’s harrowing downturn loaded with cash, thanks to deep cost-cutting that helped drive unemployment into double digits.

And although the banking crisis starved countless entrepreneurs for money last year, credit was never scarce for business titans.

March 1, 2010

The state of the recession

Filed under: Business — Tags: , , , — David Kirkpatrick @ 3:53 pm

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:

February 21, 2010

Truly frightening unemployment news

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 3:14 am

Well, I suppose this falls more under conjecture than news, but quite frightening nonetheless.

From the link:

Even as the American economy shows tentative signs of a rebound, the human toll of the recession continues to mount, with millions of Americans remaining out of work, out of savings and nearing the end of their unemployment benefits.

Economists fear that the nascent recovery will leave more people behind than in past recessions, failing to create jobs in sufficient numbers to absorb the record-setting ranks of the long-term unemployed.

And:

Every downturn pushes some people out of the middle class before the economy resumes expanding. Most recover. Many prosper. But some economists worry that this time could be different. An unusual constellation of forces — some embedded in the modern-day economy, others unique to this wrenching recession — might make it especially difficult for those out of work to find their way back to their middle-class lives.

Labor experts say the economy needs 100,000 new jobs a month just to absorb entrants to the labor force. With more than 15 million people officially jobless, even a vigorous recovery is likely to leave an enormous number out of work for years.

We may have avoided a second Great Depression to date, but the long-term effects on the U.S. economy may be very severe. Hopefully the economists who see major downturns rebounding with equally major expansions are correct. If this recession creates a large class of the permanently unemployed and drives more of the middle class down toward, or into, poverty, the social, political and economic repercussions probably are beyond our ability to imagine right now. A sizable and battered lower class does not make for a stable society.

November 18, 2009

Just in time for the holiday season …

Filed under: Business — Tags: , , , — David Kirkpatrick @ 2:45 pm

… tidings of, er, red flags and economic warnings.

From the Brad DeLong link:

For 2 1/4 years now I have been saying that there is no chance of a repeat of the Great Depression or anything like it–that we know what to do and how to do it and will do it if things turn south.

I don’t think I can say that anymore. In my estimation the chances of another big downward shock to the U.S. economy–a shock that would carry us from the 1/3-of-a-Great-Depression we have now to 2/3 or more–are about 5%. And it now looks very much as if if such a shock hits the U.S. government will be unable to do a d—– thing about it.

October 29, 2009

But then again …

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 2:19 am

Right after this positive post, I hit you with this:

But while there is a growing consensus that the so-called Great Recession ended some point earlier this year, some economists think that one quarter of solid economic growth does not indicate that a Great Recovery has begun.

Unemployment continues to rise and about 30% of factory capacity remains idle. Credit for businesses is still tight and consumer confidence is falling.

It’s also worth remembering that the economy grew as recently as the second quarter of 2008, when rebate checks sent to most taxpayers created a sugar rush of economic activity and a 1.5% rise in GDP.

Of course, that growth wasn’t enough to prevent the meltdown in financial markets last fall that touched off sharp declines over the next three quarters.

This sounds like …

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 2:14 am

some pretty promising news.

From the link:

For the first time since the recession began, the portion of companies planning to add employees in the next six months outnumbered those expecting to cut jobs, according to this month’s quarterly survey of economists at 78 firms by the National Association for Business Economics.

October 28, 2009

Do you need debt settlement services?

Debt settlement is simply the process and approach to getting out from under your unsecured debts. When you get into a debt settlement program you should be given a two basic services — a solution to lowering your unsecured debt and help in dealing with your creditors — these two services should help get you back on the path to financial freedom.

Right now household debt is a serious issue in the United States, and in this economic climate coupled with this level of unemployment debt is crippling for many people. Once you’re deep in debt it is very easy to lose control of the situation. And if you’re unemployed, or you are using credit to cover bills and basic necessities, debt can overwhelm your personal financial situation. When you reach a point of crisis your options become somewhat limited. Debt settlement is the best choice for most people, but other options include credit counseling or even personal bankruptcy.

The key to getting on top of debt problem is, of course, recognizing the problem in the first place. Usually debt problems have many ways to reminding you, maybe multiple times a day through collection efforts, of the problem. The next step is to not go into despair or resignation and start taking action to fix your debt problems.

If you are looking to go the debt settlement route you are halfway there. Be sure to take your time and choose your debt settlement company carefully. Make sure the company doesn’t make claims unsupported by the Federal Trade Commission, take note of their questions about your debt situation and household budget, get all the details about your program and find out up front how you will be charged for the service.

The economic crisis in pictures

Filed under: Business — Tags: , , , , , , , — David Kirkpatrick @ 12:52 am

Here’s four quick and easy graphs that nicely illustrate the current economy and how we got here.

From the link (hit the link for an analysis of the ongoing economic crisis and how to get out of it):

October 20, 2009

Get out from under debt

Household debt is an issue in the United States, and in the current economic climate and level of unemployment it is crippling for many people.

Check out the trend line on this chart of household debt from the beginning of 1953 to the middle of this year:

US household credit market outstanding debt

US household credit market outstanding debt

Once you’re underwater it is very easy to lose control of the situation and if you’re unemployed, or you are using credit to cover bills and basic necessities, debt can take over your personal financial situation. Once you reach that point your options become somewhat limited. The most drastic step is personal bankruptcy, but there are drawbacks to that approach and personal bankruptcy underwent significant reform in 2005 making personal  bankruptcy a much more difficult process. Other choices include credit counseling and debt settlement.

If personal debt gets beyond your control, of the three options listed above seeking professional debt settlement help is the best for most people. You don’t need to repair your credit. What you do need is to reduce your personal debt to a manageable amount, get that debt paid off as quickly as possible and move forward with your personal finances.

From the link:

Debt Settlement is process and approach to becoming free of unsecured debts. The goal of a debt settlement program is to find the best solution to lower your debts, help you deal with your creditors, and get you on the road to financial freedom.

And:

A debt settlement program can help you be free of unsecured debts in as little as 2-3 years for a fraction of your original owed amount. Even better than simply saving money is that once the settlement payment is made, your accounts will be satisfied – meaning you no longer have any of your original debt outstanding.

Hit the above link for the six steps to debt reduction.

October 2, 2009

TARP turns one — a birthday with no candles, no cake from me

TARP, the original bailout jammed through in a blind panic, turns a year-old tomorrow. Its expiration is scheduled for the end of the year unless Treasury Secretary Tim Geithner decides to keep it rolling.

From the link:

As of Saturday, it will have been a year since the U.S. Congress created the $700 billion Troubled Asset Relief Program, originally intended as a bailout just for the financial system.

Emphasis might be placed on the word “Troubled,” as TARP has been plagued by controversy since conception. For the past year, the Bush and Obama administrations have used the program as a bailout smorgasbord, with entrees for the auto and mortgage industries, the securitization market for consumer goods, American International Group (See “What AIG Really Owes Taxpayers”) and the banking sector at large. Toxic assets remain on bank balance sheets, Congress is still busy plugging TARP’s holes on executive compensation limits and the program is a significant part of the country’s projected $1.6 trillion deficit for 2009.

September 30, 2009

The economy wasn’t quite as bad as thought for Q2

More of that, “Well, the news still isn’t good, but it is better than we thought.” There’s a lot of looking for any ray of positive economic news still going on.

From the link:

The U.S. economy contracted at slower pace than previously thought in the second quarter as improved consumer and business spending cushioned the impact of a record decline in inventories, according to a government report on Wednesday.

The Commerce Department’s final estimate showed gross domestic product fell at a 0.7 percent annual rate instead of the 1.0 percent decline reported last month.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, slipping at a 1.2 percent rate in the second quarter after dropping 6.4 percent in the January-March period.

This will probably mark the last quarter of decline in output for the U.S. economy, which slipped into recession in December 2007. The economy is believed to have rebounded in the July-September quarter.

With the second-quarter contraction, the country’s real GDP has shrunk for four straight quarters for the first time since government records started in 1947.

September 25, 2009

Shortsighted CEOs

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 4:30 pm

Or was it nearsighted? Or maybe just plain blind as bats. At any rate this is a humorous, and sad, collection of quotes from erstwhile kings of Wall Street.

From the link:

Richard Fuld, Lehman Brothers: “Our core franchise and our culture are strong. Our capital and liquidity positions have never been stronger.”—June 16, 2008, on a conference call with analysts

What happened next: With clients pulling their money from Lehman accounts, the firm ran short of cash. Fuld reportedly turned down a financing offer from Warren Buffett, perhaps because he thought a government bailout—like that of Bear Stearns—would come with better terms. But no bailout materialized, and Lehman filed for bankruptcy on Sept. 15, 2008.

September 22, 2009

The next shoe? Option ARM mortgages

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 5:42 pm

I’ll have to admit, this is one mortgage vehicle I’ve never heard of, and it sounds pretty bad. I thought I was ahead of the curve 0n commercial paper, but clearly the insanity at all levels of real estate are going to reverberate for quite some time.

From the first link:

The federal government and states are girding themselves for the next foreclosure crisis in the country’s housing downturn: payment option adjustable rate mortgages that are beginning to reset.

“Payment option ARMs are about to explode,” Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama‘s administration to discuss ways to combat mortgage scams.

“That’s the next round of potential foreclosures in our country,” he said.

Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These “underwater” mortgages have been a driving force behind rising defaults and mounting foreclosures.

In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state’s attorney general, Terry Goddard, told Reuters after the meeting.

“It’s the other shoe,” he said. “I can’t say it’s waiting to drop. It’s dropping now.”

September 17, 2009

Consumer spending not returning anytime soon

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 7:02 pm

[Note: this is the replacement for this lost post without the extensive additional commentary from the lost original.]

News from Bloomberg:

Americans plan to refrain from boosting their spending even after the biggest drop in consumption since 1980, signaling concern about the direction of the economy over the next six months.

Only 8 percent of U.S. adults plan to increase household spending, almost one-third will spend less, and 58 percent expect to “stay the course,” a Bloomberg News poll showed. More than 3 in 4 said they reduced spending in the past year.

Respondents were divided over whether the economy will get better or stay the same in the next six months; only 1 in 6 said things will get worse. More than 40 percent of those surveyed said they feel less financially secure than they did when President Barack Obama took office in January, outnumbering 35 percent who said they feel more secure.

Older Posts »