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Vocapedia > Economy > Slump, Recession, Depression

 

 

 

Tab (Thomas Boldt)

The Calgary Sun

Alberta, Canada

Cagle

1.11.2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scott Stantis

The Birmingham News

Alabama

Cagle

18.9.2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brian Fairrington

Cagle

22 January 2009

President Barack Obama

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Crisis — The Essential        2008-2009

http://topics.nytimes.com/top/reference/timestopics/subjects/c/
credit_crisis/index.html

 

 

 

 

sluggish economy        USA

http://www.nytimes.com/2012/06/14/
business/economy/weak-economys-mixed-blessing-falling-commodity-prices.html

 

 

 

 

downturn        UK

http://www.guardian.co.uk/money/2012/mar/14/
tenants-bear-brunt-economic-downturn

 

http://www.guardian.co.uk/business/2008/oct/25/
globalrecession-globaleconomy

 

 

 

 

downturn        USA

http://www.nytimes.com/2010/08/07/us/
07cutbacksWEB.html
 

 

 

 

 

deep downturn

 

 

 

 

severe downturn        UK

http://www.guardian.co.uk/politics/2008/dec/16/
alistair-darling-chancellor-tessa-jowell

 

 

 

 

slowdown / industrial slowdown        UK

https://www.theguardian.com/business/2012/dec/07/
uk-triple-dip-recession-alert

https://www.ft.com/content/b97c5ca0-30ad-11de-bc38-00144feabdc0

 

 

 

 

slowdown        USA

https://www.npr.org/sections/coronavirus-live-updates/2020/03/20/
818906241/the-economy-is-getting-hit-hard-and-the-forecasts-are-scary

 

 

 

 

slump        UK

http://www.guardian.co.uk/world/2013/jan/19/snow-triple-dip-recession

 

https://www.theguardian.com/business/2008/oct/20/
recession-economy-slump-crunch

 

 

 

 

slump        USA        2011-2014

http://www.nytimes.com/2014/08/15/opinion/paul-krugman-the-forever-slump.html

 

http://www.nytimes.com/2013/11/18/opinion/krugman-a-permanent-slump.html

 

http://www.nytimes.com/2011/09/27/us/
unrelenting-downturn-is-redrawing-americas-economic-map.html

 

 

 

 

slide into a 1930s-style slump        UK

http://www.guardian.co.uk/business/2011/dec/15/imf-world-risks-1930s-style-slump

 

 

 

 

crunch        2009-2011

https://www.theguardian.com/money/2010/nov/25/
triple-crunch-lower-middle-classes

http://www.independent.co.uk/news/uk/politics/
cameron-urges-ethical-capitalism-after-crunch-1222122.html

http://www.reuters.com/article/reutersEdge/idUSTRE4AK00320081121

 

 

 

 

hit the brakes        USA

https://www.npr.org/sections/coronavirus-live-updates/2020/03/20/
818906241/the-economy-is-getting-hit-hard-and-the-forecasts-are-scary

 

 

 

 

economic doldrums        USA        2010

http://www.nytimes.com/2010/09/22/business/22dollar.html

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recession        UK

 

https://www.theguardian.com/business/recession

 

 

http://www.guardian.co.uk/business/2012/may/22/imf-bank-of-england-rate-cut-growth

http://www.guardian.co.uk/news/datablog/interactive/2012/apr/25/economicgrowth-recession

http://www.guardian.co.uk/business/2012/apr/26/britain-long-depression-100-years

 

http://www.guardian.co.uk/business/2010/jul/12/uk-recession-deeper-than-first-thought

 

http://www.guardian.co.uk/business/2009/oct/23/uk-economy-lonest-recession-record

http://www.guardian.co.uk/business/2009/jun/10/uk-industrial-production-recession

http://www.guardian.co.uk/business/2009/jun/10/uk-industrial-output-increase

 

http://www.guardian.co.uk/commentisfree/belief/2008/dec/05/religion-recession-prosperity-gospel

http://www.independent.co.uk/news/uk/this-britain/the-domino-effect-road-to-recession-1012202.html

http://www.guardian.co.uk/business/2008/nov/12/inflation-interest-rates-recession

http://www.guardian.co.uk/business/2008/oct/25/recession-credit-crunch-economy-ftse

http://www.guardian.co.uk/business/2008/oct/22/pound-recession-interest-rates

http://www.guardian.co.uk/business/2008/oct/22/mervyn-king-recession-economy

http://www.guardian.co.uk/business/2008/oct/22/pound-recession-interest-rates

https://www.theguardian.com/business/2008/oct/20/
recession-economy-slump-crunch

 

 

 

 

domino effect        UK        2008

http://www.independent.co.uk/news/uk/this-britain/
the-domino-effect-road-to-recession-1012202.html

 

 

 

 

global recession        UK

https://www.theguardian.com/business/globalrecession

 

 

http://www.guardian.co.uk/business/2009/feb/18/
inflation-global-recession

 

 

 

 

recession        USA

https://www.nytimes.com/topic/subject/recession 

 

 

https://www.npr.org/2018/06/29/
624241713/is-the-u-s-headed-for-recession

 

https://www.npr.org/2017/12/14/
570556990/unhappy-10th-anniversary-great-recession-you-still-hurt-us

 

http://www.npr.org/sections/ed/2016/10/22/
498689995/for-many-schools-the-recession-never-ended

 

http://www.nytimes.com/interactive/2014/06/14/business/this-side-of-the-recession.html

 

http://www.nytimes.com/2011/10/09/sunday-review/the-depression-if-only-things-were-that-good.html

http://www.nytimes.com/2011/09/14/opinion/fixing-the-economy-cost-of-inaction.html

 

http://www.nytimes.com/2010/10/13/business/economy/13econ.html

http://www.nytimes.com/2010/09/21/business/economy/21econ.html

http://submit.nytimes.com/picturing-the-recession

 

http://www.nytimes.com/2009/03/04/business/04leonhardt.html

 

http://www.nytimes.com/slideshow/2008/12/06/business/1206-JOBS_10.html

http://www.usatoday.com/money/economy/2008-12-01-recession-official_N.htm

http://www.reuters.com/article/reutersEdge/idUSTRE48S8X320080929

http://www.reuters.com/article/politicsNews/idUSTRE48O0PT20080925

http://www.reuters.com/article/politicsNews/
idUKTRE48O0UE20080925?virtualBrandChannel=10112

 

 

 

 

Cartoons > Cagle > Recession's over        USA        September 2010

http://cagle.com/news/RecessionOVER/

 

 

 

 

recession > living with less        USA

https://www.nytimes.com/interactive/projects/living-with-less

 

 

 

 

deep recession        2008-2009

http://www.telegraph.co.uk/finance/financetopics/recession/4589501/
Bank-of-England-Governor-Mervyn-King-says-UK-economy-is-in-deep-recession.html

http://www.guardian.co.uk/business/2009/feb/11/
inflation-bankofenglandgovernor

 

http://www.guardian.co.uk/politics/2008/dec/14/
gordon-brown-borrowing-recession

http://www.guardian.co.uk/business/2008/nov/13/
inflation-deflation-interest-rates-recession

 

 

 

 

worsening recession

 

 

 

 

fears of deep worldwide recession        UK

http://www.guardian.co.uk/business/2008/oct/27/
shares-crash-world-recession

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Great Recession        2008-2017        USA  

 

https://www.npr.org/2018/11/03/
662191658/new-homebuyers-face-a-friendlier-housing-market-thanks-to-cooldown

 

https://www.npr.org/2017/12/14/
570556990/unhappy-10th-anniversary-great-recession-you-still-hurt-us

 

http://www.nytimes.com/interactive/2016/02/24/
business/distress-cities-counties.html

 

http://www.nytimes.com/2013/01/30/
opinion/friedman-its-pq-and-cq-as-much-as-iq.html

 

http://www.nytimes.com/2011/01/19/
opinion/19wed1.html

 

http://www.nytimes.com/2010/10/13/
business/economy/13econ.html

http://www.nytimes.com/2010/09/03/
opinion/03reich.html

 

http://www.nytimes.com/2009/11/03/
opinion/03zandi.html

http://www.nytimes.com/2009/09/13/
business/economy/13manufacture.html

http://www.reuters.com/article/newsOne/idUSTRE5291O520090310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

global recession        USA

http://www.boston.com/bigpicture/2009/03/
scenes_from_the_recession.html

 

 

 

 

head towards a depression

 

 

 

 

plunge into a deep recession

http://www.nytimes.com/2008/12/13/
business/13private.html

 

 

 

 

slip back into a recesssion

 

 

 

 

gross domestic product    GDP        USA

https://www.nytimes.com/topic/subject/
gross-domestic-product-us 

 

 

http://www.reuters.com/article/2011/11/02/us-usa-
fed-idUSTRE7A057A20111102

 

http://www.nytimes.com/2010/08/27/
opinion/27krugman.html

 

 

 

 

gross domestic product    GDP        UK        2012-2009-2008

https://www.theguardian.com/business/economicgrowth

 

http://www.guardian.co.uk/news/datablog/interactive/2012/apr/25/
economicgrowth-recession

http://www.guardian.co.uk/business/2010/jul/12/
experts-on-revised-gdp-figures

 

http://www.guardian.co.uk/business/2009/jul/24/uk-
gdp-record-fall

 

http://www.guardian.co.uk/business/interactive/2008/oct/22/
creditcrunch-recession

 

 

 

 

grim / bleak GDP figures        2008

http://www.guardian.co.uk/business/2008/dec/23/
economicgrowth-recession

http://www.guardian.co.uk/business/interactive/2008/oct/22/
creditcrunch-recession

 

 

 

 

UK GDP since 1948        UK        2009

 

Gross Domestic Product

is the output of Britain.

 

Find out

how this recession

compares to the others

http://www.guardian.co.uk/news/datablog/2009/nov/25/gdp-uk-
1948-growth-economy

 

 

 

 

Office for National Statistics

https://www.gov.uk/government/statistics/announcements  

 

 

 

 

UK growth

 

 

 

recession > Hight street        UK

http://www.guardian.co.uk/business/2008/dec/29/
high-street-retailers-administration

 

 

 

 

shrink

http://www.guardian.co.uk/business/2008/oct/25/
recession-credit-crunch-economy-ftse

 

 

 

 

dip

 

 

 

 

double dip        UK

http://www.guardian.co.uk/commentisfree/2010/jul/13/
george-osborne-hold-hike-double-dip

 

 

 

 

double-dip downturn

 

 

 

 

double-dip recession        UK / USA

http://www.guardian.co.uk/business/2012/apr/25/
recession-figures-bad-day-osborne

http://www.guardian.co.uk/politics/2012/apr/25/
double-dip-recession-george-osborne

http://www.guardian.co.uk/politics/reality-check-with-polly-curtis/2012/apr/25/
economicgrowth-debt-crisis

 

http://www.guardian.co.uk/business/2011/nov/30/
world-central-banks-act-credit-crunch

http://www.nytimes.com/2011/08/05/
business/economy/double-dip-recession-may-be-returning.html

 

http://www.nytimes.com/2010/09/04/
business/economy/04jobs.html

http://www.guardian.co.uk/business/2010/jul/12/
economic-growth-recession-uk

 

 

 

 

triple-dip recession        UK

http://www.guardian.co.uk/world/2013/jan/19/
snow-triple-dip-recession

http://www.guardian.co.uk/business/2013/jan/04/uk-
service-sector-contracts-pmi

 

http://www.guardian.co.uk/business/2012/dec/07/uk-
triple-dip-recession-alert

http://www.guardian.co.uk/business/2012/nov/14/uk-
risks-triple-dip-recession-mervyn-king

 

 

 

 

misery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Monte Wolverton

The Wolvertoon

Cagle

4 July 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depression        UK

http://www.guardian.co.uk/commentisfree/2011/oct/10/
stop-another-great-depression-debt

 

 

 

 

depresssion        USA

http://www.nytimes.com/2015/01/11/
upshot/the-depressions-unheeded-lessons-.html

 

http://www.nytimes.com/2011/12/12/
opinion/krugman-depression-and-democracy.html

 

http://www.nytimes.com/2010/06/28/
opinion/28krugman.html

 

 

 

 

Great Depression        UK

https://www.theguardian.com/society/2017/mar/04/
crash-1929-wall-street-what-the-great-depression-reveals-about-our-future

https://www.theguardian.com/society/2017/mar/04/
hunger-new-york-outrage-germany-guernica-ruins-guardian-leader-writers-comment-hitler

 

https://www.theguardian.com/commentisfree/2011/oct/10/
stop-another-great-depression-debt 

 

 

 

 

How the Government Dealt With Past Recessions        USA        2009

 

Since the Great Depression,

presidents have frequently experimented

with Keynesian economics

to combat recessions.

 

Three economists chronicle

the history of government policy

during past recessions

and explain what worked and what didn’t

http://www.nytimes.com/interactive/2009/01/26/
business/economy/20090126-recessions-graphic.html

 

 

 

 

USA > the Great Depression        USA        1930s

http://www.loc.gov/search/greatdepression.html

http://www.pbs.org/wgbh/amex/dustbowl/peopleevents/pandeAMEX05.html

 

http://www.nytimes.com/2015/01/11/
upshot/the-depressions-unheeded-lessons-.html

 

http://www.nytimes.com/2008/12/22/
opinion/22gup.html

http://www.usatoday.com/money/economy/2008-10-22-
depression_N.htm

 

 

 

 

Selling Christmas during the Great Depression        USA

 

Tribune ads from the era show

retailers in aggressive pursuit of those spare dimes

http://www.chicagotribune.com/chi-081209-
depression-xmas-ads-pg,0,742816.photogallery

 

 

 

 

Sights and sounds of the Great Depression        USA

http://www.usatoday.com/money/economy/2008-10-22-
great-depression-audioslides_N.htm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

stimulus

http://www.npr.org/2017/04/05/
522629542/fact-check-trumps-claim-2009-stimulus-measure-built-nothing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

austerity        IRE

http://www.nytimes.com/2011/12/06/
business/global/despite-praise-for-its-austerity-ireland-and-its-people-are-being-battered.html

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gerald Scarfe cartoon

Sunday Times

November 16, 2008
http://www.timesonline.co.uk/tol/comment/article5180525.ece

 

L to R: Chancellor Alistair Darling (?),

British Prime Minister Gordon Brown,

French President Nicolas Sarkozy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gerald Scarfe cartoon

Sunday Times

October 26, 2008
http://www.timesonline.co.uk/tol/comment/article5014205.ece

 

L to R: British prime minister Gordon Brown, Chancellor Alistair Darling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Britain's economy

sinks into longest depression

for 100 years

Slump in financial services,
building and the high street
mean it is unlikely economic growth
can be regained until 2014

 

Thursday 26 April 2012
The Guardian
Phillip Inman, economics correspondent
This article appeared on p14
of the Main section section of the Guardian
on Thursday 26 April 2012.
It was published on guardian.co.uk
at 00.02 BST on Thursday 26 April 2012.
It was last modified at 00.16 BST
on Thursday 26 April 2012.

 

Britain's economy has sunk into recession for the second time in three years after a dramatic slump across the financial services and construction sectors and a poor start to the year on the high street.

Official figures showed the economy contracted in the first three months of the year after a poor performance before Christmas. This meant it registered two consecutive quarters of negative growth, the standard definition of a recession. The economy is now in its longest depression for 100 years, with little sign of regaining its previous record output before 2014.

A silver lining was provided by a CBI survey of the manufacturing sector that pointed to a recovery in sales and confidence, albeit from one of its worst slumps on record in January. And a survey by the British Retail Consortium found an increasing willingness by shop owners to hire workers. More than 3,000 jobs were created, mainly by large supermarkets opening new stores.

But HSBC, Britain's largest bank, offset this news when it announced plans to shed 2,000 staff in its UK retail division over the next year as part of a worldwide redundancy programme. Banks have cut thousands of jobs in the past few years to reduce costs and cope with a sharp slowdown in business caused by the financial crisis and subsequent drop in lending.

The business and financial services sector fell by 0.1% in the first three months of the year. The once all-powerful financial services sector, which accounts for a whopping 29% of GDP, "made the largest negative contribution", according to the Office for National Statistics.

The CBI said it was concerned that poor GDP figures would persuade other employers that a recent improvement in sentiment across several sectors was misplaced, leading them to reverse plans to add jobs and increase investment. Forecasters have pencilled in growth of around 0.8% this year followed by a jump to 2% next year. But several economists argue that, without a rethink of its austerity measures by the Treasury and limited plans for investment, growth could evaporate next year as quickly as it did over the past two years.

After a series of small ups and downs, output has flatlined since September 2010, according to the ONS, shortly after the coalition government took office. Its latest survey of output showed a contraction of 0.2% in the first quarter after a 0.3% decline in the last three months of 2011.

Several European countries have been hit by double-dip recessions following turmoil in the eurozone and the fallout from the Greek crisis. Italy, Spain, France and the Netherlands have all seen growth turn negative in the past six months. Spain, in particular, is expected to remain in difficulty throughout the year as it wrestles with soaring unemployment, rising debt levels and a fall in consumer spending after wage and benefit cuts.

Concern over Spain's future and the possibility it will need a multibillion-euro bailout from Brussels and the International Monetary Fund has weighed heavily on global growth. While the situation in the UK is less acute, the government could face a similar squeeze towards the end of the year once welfare benefit cuts, limits on tax credit payments and persistently high inflation have taken their toll.

Pay rises have lagged behind inflation for more than two years, cutting disposable incomes and hurting high street spending, with a knock-on effect for the Treasury in lower tax receipts. But the US economy has grown strongly. Ben Bernanke, the central bank chief, said on Wednesday that the outlook remained on course for moderate growth, although he cited Europe as a reason to be cautious. The US economy is expected to have grown 2.5% in the first quarter when estimates are published on Friday. The ONS said that Britain's service industries, which make up more than three-quarters of the economy, grew by just 0.1% in the first quarter, after declining by 0.1% in the fourth quarter of last year. Industrial output was 0.4% lower, while construction shrank by 3% – the biggest drop since the start of 2009.

Like the US Fed, the Bank of England has refrained from pumping more money into the economy under its quantitative easing programme, which currently stands at £325bn.

"The biggest surprise – and perhaps the most worrying element of this report – was the disappointment in services output," said Alan Clarke at Scotia bank. "Ironically, construction, which had the most potential to determine whether or not the UK is in recession, proved much less negative than feared. The Bank [of England] recently highlighted that it cares most about underlying growth. Our gauge of underlying GDP showed zero growth – still very disappointing."

The GDP figures conflict with other recent surveys, which have painted a steadily improving economic picture.Economists also question the reliability of the construction numbers. Joe Grice, the statistics office's chief economist, said the bigger picture is that the UK economy, in volume terms, was flat between January and March compared with the same period last year. Looking at the UK since last summer, he added that the picture is of "a flattish economy". Britain is the first major economy to report GDP data for the first quarter of 2012.

Britain's economy sinks into longest depression for 100 years,
G, 26.4.2012,
https://www.theguardian.com/business/2012/apr/26/
britain-long-depression-100-years

 

 

 

 

 

Depression and Democracy

 

December 11, 2011

The New York Times

By PAUL KRUGMAN

 

It’s time to start calling the current situation what it is: a depression. True, it’s not a full replay of the Great Depression, but that’s cold comfort. Unemployment in both America and Europe remains disastrously high. Leaders and institutions are increasingly discredited. And democratic values are under siege.

On that last point, I am not being alarmist. On the political as on the economic front it’s important not to fall into the “not as bad as” trap. High unemployment isn’t O.K. just because it hasn’t hit 1933 levels; ominous political trends shouldn’t be dismissed just because there’s no Hitler in sight.

Let’s talk, in particular, about what’s happening in Europe — not because all is well with America, but because the gravity of European political developments isn’t widely understood.

First of all, the crisis of the euro is killing the European dream. The shared currency, which was supposed to bind nations together, has instead created an atmosphere of bitter acrimony.

Specifically, demands for ever-harsher austerity, with no offsetting effort to foster growth, have done double damage. They have failed as economic policy, worsening unemployment without restoring confidence; a Europe-wide recession now looks likely even if the immediate threat of financial crisis is contained. And they have created immense anger, with many Europeans furious at what is perceived, fairly or unfairly (or actually a bit of both), as a heavy-handed exercise of German power.

Nobody familiar with Europe’s history can look at this resurgence of hostility without feeling a shiver. Yet there may be worse things happening.

Right-wing populists are on the rise from Austria, where the Freedom Party (whose leader used to have neo-Nazi connections) runs neck-and-neck in the polls with established parties, to Finland, where the anti-immigrant True Finns party had a strong electoral showing last April. And these are rich countries whose economies have held up fairly well. Matters look even more ominous in the poorer nations of Central and Eastern Europe.

Last month the European Bank for Reconstruction and Development documented a sharp drop in public support for democracy in the “new E.U.” countries, the nations that joined the European Union after the fall of the Berlin Wall. Not surprisingly, the loss of faith in democracy has been greatest in the countries that suffered the deepest economic slumps.

And in at least one nation, Hungary, democratic institutions are being undermined as we speak.

One of Hungary’s major parties, Jobbik, is a nightmare out of the 1930s: it’s anti-Roma (Gypsy), it’s anti-Semitic, and it even had a paramilitary arm. But the immediate threat comes from Fidesz, the governing center-right party.

Fidesz won an overwhelming Parliamentary majority last year, at least partly for economic reasons; Hungary isn’t on the euro, but it suffered severely because of large-scale borrowing in foreign currencies and also, to be frank, thanks to mismanagement and corruption on the part of the then-governing left-liberal parties. Now Fidesz, which rammed through a new Constitution last spring on a party-line vote, seems bent on establishing a permanent hold on power.

The details are complex. Kim Lane Scheppele, who is the director of Princeton’s Law and Public Affairs program — and has been following the Hungarian situation closely — tells me that Fidesz is relying on overlapping measures to suppress opposition. A proposed election law creates gerrymandered districts designed to make it almost impossible for other parties to form a government; judicial independence has been compromised, and the courts packed with party loyalists; state-run media have been converted into party organs, and there’s a crackdown on independent media; and a proposed constitutional addendum would effectively criminalize the leading leftist party.

Taken together, all this amounts to the re-establishment of authoritarian rule, under a paper-thin veneer of democracy, in the heart of Europe. And it’s a sample of what may happen much more widely if this depression continues.

It’s not clear what can be done about Hungary’s authoritarian slide. The U.S. State Department, to its credit, has been very much on the case, but this is essentially a European matter. The European Union missed the chance to head off the power grab at the start — in part because the new Constitution was rammed through while Hungary held the Union’s rotating presidency. It will be much harder to reverse the slide now. Yet Europe’s leaders had better try, or risk losing everything they stand for.

And they also need to rethink their failing economic policies. If they don’t, there will be more backsliding on democracy — and the breakup of the euro may be the least of their worries.

    Depression and Democracy, NYT, 11.12.2011,
    http://www.nytimes.com/2011/12/12/opinion/
    krugman-depression-and-democracy.html

 

 

 

 

 

The Depression:

If Only Things Were That Good

 

October 8, 2011
The New York Times
By DAVID LEONHARDT

 

David Leonhardt

is The New York Times Washington bureau chief.
 


UNDERNEATH the misery of the Great Depression, the United States economy was quietly making enormous strides during the 1930s. Television and nylon stockings were invented. Refrigerators and washing machines turned into mass-market products. Railroads became faster and roads smoother and wider. As the economic historian Alexander J. Field has said, the 1930s constituted “the most technologically progressive decade of the century.”

Economists often distinguish between cyclical trends and secular trends — which is to say, between short-term fluctuations and long-term changes in the basic structure of the economy. No decade points to the difference quite like the 1930s: cyclically, the worst decade of the 20th century, and yet, secularly, one of the best.

It would clearly be nice if we could take some comfort from this bit of history. If anything, though, the lesson of the 1930s may be the opposite one. The most worrisome aspect about our current slump is that it combines obvious short-term problems — from the financial crisis — with less obvious long-term problems. Those long-term problems include a decade-long slowdown in new-business formation, the stagnation of educational gains and the rapid growth of industries with mixed blessings, including finance and health care.

Together, these problems raise the possibility that the United States is not merely suffering through a normal, if severe, downturn. Instead, it may have entered a phase in which high unemployment is the norm.

On Friday, the Labor Department reported that job growth was mediocre in September and that unemployment remained at 9.1 percent. In a recent survey by the Federal Reserve Bank of Philadelphia, forecasters said the rate was not likely to fall below 7 percent until at least 2015. After that, they predicted, it would rarely fall below 6 percent, even in good times.

Not so long ago, 6 percent was considered a disappointingly high unemployment rate. From 1995 to 2007, the jobless rate exceeded 6 percent for only a single five-month period in 2003 — and it never topped 7 percent.

“We’ve got a double-whammy effect,” says John C. Haltiwanger, an economics professor at the University of Maryland. The cyclical crisis has come on top of the secular one, and the two are now feeding off each other.

In the most likely case, the United States has fallen into a period somewhat similar to the one that Europe has endured for parts of the last generation; it is rich but struggling. A high unemployment rate will feed fears of national decline. The political scene may be tumultuous, as it already is. Many people will find themselves shut out of the work force.

Almost 6.5 million people have been officially unemployed for at least six months, and another few million have dropped out of the labor force — that is, they are no longer looking for work — since 2008. These hard-core unemployed highlight the nexus between long-term and short-term economic problems. Most lost their jobs because of the recession. But many will remain without work long after the economy begins growing again.

Indeed, they will themselves become a force weighing on the economy. Fairly or not, employers will be reluctant to hire them. Many with borderline health problems will end up in the federal disability program, which has become a shadow welfare program that most beneficiaries never leave.

For now, the main cause of the economic funk remains the financial crisis. The bursting of a generation-long, debt-enabled consumer bubble has left households rebuilding their balance sheets and businesses wary of hiring until they are confident that consumer spending will pick up. Even now, sales of many big-ticket items — houses, cars, appliances, many services — remain far below their pre-crisis peaks.

Although the details of every financial crisis differ, the broad patterns are similar. The typical crisis leads to almost a decade of elevated unemployment, according to oft-cited academic research by Carmen M. Reinhart and Kenneth S. Rogoff. Ms. Reinhart and Mr. Rogoff date the recent crisis from the summer of 2007, which would mean our economy was not even halfway through its decade of high unemployment.

Of course, making dark forecasts about the American economy, especially after a recession, can be dangerous. In just the last 50 years, doomsayers claimed that the United States was falling behind the Soviet Union, Japan and Germany, only to be proved wrong each time.

This country continues to have advantages that no other country, including China, does: the world’s best venture-capital network, a well-established rule of law, a culture that celebrates risk taking, an unmatched appeal to immigrants. These strengths often give rise to the next great industry, even when the strengths are less salient than the country’s problems.

THAT’S part of what happened in the 1930s. It’s also happened in the 1990s, when many people were worrying about a jobless recovery and economic decline. At a 1992 conference Bill Clinton convened shortly after his election to talk about the economy, participants recall, no one mentioned the Internet.

Still, the reasons for concern today are serious. Even before the financial crisis began, the American economy was not healthy. Job growth was so weak during the economic expansion from 2001 to 2007 that employment failed to keep pace with the growing population, and the share of working adults declined. For the average person with a job, income growth barely exceeded inflation.

The closest thing to a unified explanation for these problems is a mirror image of what made the 1930s so important. Then, the United States was vastly increasing its productive capacity, as Mr. Field argued in his recent book, “A Great Leap Forward.” Partly because the Depression was eliminating inefficiencies but mostly because of the emergence of new technologies, the economy was adding muscle and shedding fat. Those changes, combined with the vast industrialization for World War II, made possible the postwar boom.

In recent years, on the other hand, the economy has not done an especially good job of building its productive capacity. Yes, innovations like the iPad and Twitter have altered daily life. And, yes, companies have figured out how to produce just as many goods and services with fewer workers. But the country has not developed any major new industries that employ large and growing numbers of workers.

There is no contemporary version of the 1870s railroads, the 1920s auto industry or even the 1990s Internet sector. Total economic output over the last decade, as measured by the gross domestic product, has grown more slowly than in any 10-year period during the 1950s, ’60s, ’70s, ’80s or ’90s.

Perhaps the most important reason, beyond the financial crisis, is the overall skill level of the work force. The United States is the only rich country in the world that has not substantially increased the share of young adults with the equivalent of a bachelor’s degree over the past three decades. Some less technical measures of human capital, like the percentage of children living with two parents, have deteriorated. The country has also chosen not to welcome many scientists and entrepreneurs who would like to move here.

The relationship between skills and economic success is not an exact one, yet it is certainly strong enough to notice, and not just in the reams of peer-reviewed studies on the subject. Australia, New Zealand, Canada and much of Northern Europe have made considerable educational progress since the 1980s, for instance. Their unemployment rates, which were once higher than ours, are now lower. Within this country, the 50 most educated metropolitan areas have an average jobless rate of 7.3 percent, according to Moody’s Analytics; in the 50 least educated, the average rate is 11.4 percent.

Despite the media’s focus on those college graduates who are struggling, it’s not much of an exaggeration to say that people with a four-year degree — who have an unemployment rate of just 4.3 percent — are barely experiencing an economic downturn.

Economic downturns do often send people streaming back to school, and this one is no exception. So there is a chance that it will lead to a surge in skill formation. Yet it seems unlikely to do nearly as much on that score as the Great Depression, which helped make high school universal. High school, of course, is free. Today’s educational frontier, college, is not. In fact, it has become more expensive lately, as state cutbacks have led to tuition increases.

Beyond education, the American economy seems to be suffering from a misallocation of resources. Some of this is beyond our control. China’s artificially low currency has nudged us toward consuming too much and producing too little. But much of the misallocation is homegrown.

In particular, three giant industries — finance, health care and housing — now include large amounts of unproductive capacity. Housing may have shrunk, but it is still a bigger, more subsidized sector in this country than in many others.

Health care is far larger, with the United States spending at least 50 percent more per person on medical care than any other country, without getting vastly better results. (Some aspects of our care, like certain cancer treatments, are better, while others, like medical error rates, are worse.) The contrast suggests that a significant portion of medical spending is wasted, be it on approaches that do not make people healthier or on insurance-company bureaucracy.

In finance, trading volumes have boomed in recent decades, yet it is unclear how much all the activity has lifted living standards. Paul A. Volcker, the former Fed chairman, has mischievously said that the only useful recent financial innovation was the automated teller machine. Critics like Mr. Volcker argue that much of modern finance amounts to arbitrage, in which technology and globalization have allowed traders to profit from being the first to notice small price differences.

IN the process, Wall Street has captured a growing share of the world’s economic pie — thereby increasing inequality — without doing much to expand the pie. It may even have shrunk the pie, given that a new International Monetary Fund analysis found that higher inequality leads to slower economic growth.

The common question with these industries is whether they are using resources that could do more economic good elsewhere. “The health care problem is very similar to the finance problem,” says Lawrence F. Katz, a Harvard economist, “in that incredibly talented people are wasting their talent on something that is essentially a zero-sum game.”

In the short term, finance, health care and housing provide jobs, as their lobbyists are quick to point out. But it is hard to see how the jobs of the future will spring from unnecessary back surgery and garden-variety arbitrage. They differ from the growth engines of the past, which delivered fundamental value — faster transportation or new knowledge — and let other industries then build off those advances.

The United States has long overcome its less dynamic industries by replacing them with more dynamic ones. The decline of the horse and buggy, difficult as it may have been for people in the business, created no macroeconomic problems. The trouble today is that those new industries don’t seem to be arriving very quickly.

The rate at which new companies are created has been falling for most of the last decade. So has the pace at which existing companies add positions. “The current problem is not that we have tons of layoffs,” Mr. Katz says. “It’s that we don’t have much hiring.”

If history repeats itself, this situation will eventually turn around. Maybe some American scientist in a laboratory somewhere is about to make a breakthrough. Maybe an entrepreneur is on the verge of creating a great new product. Maybe the recent health care and financial-regulation laws will squeeze the bloat.

For now, the evidence for such optimism remains scant. And the economy remains millions of jobs away from being even moderately healthy.

    The Depression: If Only Things Were That Good, NYT, 8.10.2011,
    http://www.nytimes.com/2011/10/09/sunday-review/the-depression-if-only-things-were-that-good.html

 

 

 

 

 

Killing the Recovery

 

September 28, 2011
The New York Times

 

The world has barely dug out of recession and the global economy is again slowing dangerously. Most leaders seem eager to make things even worse.

Instead of looking for ways to reignite growth, Europe’s leaders — and Republicans on Capitol Hill — are determined to slash public spending. Europe’s fixation on austerity is also compounding its debt crisis, bringing the Continent even closer to the brink. Meanwhile, China’s government, which is struggling to contain inflation without letting its currency rise, has been trying to slow domestic demand, allowing its trade surplus to balloon.

Each of these policies is wrong. In combination, they are likely to tip the world into a deep recession.

The International Monetary Fund has cut its forecast for global growth this year to 4 percent, from the 4.3 percent it had forecast in April. It expects rich countries to grow by only 1.6 percent. That may be too optimistic.

The I.M.F. forecasts that the United States will grow by 1.5 percent this year and 1.9 percent in 2012. But that assumes Congress will continue payroll tax cuts and extended unemployment insurance, as President Obama has called for. Mark Zandi of Moody’s Economy.com warns that if Congress fails to do so, the country will probably slip into recession.

Europe is in even worse shape. Rich nations that could afford to spend more to increase growth, like Germany and Britain, are instead slashing spending. Germany and its rich neighbors are also insisting that Greece, Portugal and other debtor countries accept even stiffer doses of austerity to regain the confidence of investors. Sending these economies into near collapse means that they will never be able to dig out or pay off their creditors.

While the German Parliament is expected to approve a new $600 billion bailout fund on Thursday, many European leaders already admit it is too small to deal with turmoil that now also threatens Spain and Italy.

It is true that many countries do not have the money to pay for policies to promote employment and growth. The United States, Britain, Germany and China could boost global demand by spending more at home and buying more from weaker countries that cannot stimulate their own economies.

The United States government must cut its budget deficit, but the economy must recover first. According to Mr. Zandi, President Obama’s $450 billion jobs plan could add 1.9 million jobs in 2012 and cut the unemployment rate by a percentage point. With interest rates so low, the government could easily pay for a bigger program.

The British government has similar room to maneuver. And its stubborn insistence on fiscal austerity is already causing havoc. But the countries that could do most to assist global growth are China and Germany.

China today makes 14 percent of the world’s economic product but consumes only 6 percent of it. Allowing its currency to rise would help combat inflation by lowering the domestic price of imports, while increasing the spending power of the Chinese people.

Germany’s export model is also failing, producing little growth while sucking demand from its neighbors. Germany could easily raise money at low cost to stimulate its own consumption. Yet not only has it refused stimulus spending, it is imposing austerity on the rest of Europe — forcing weak countries to contract their economies in exchange for its aid.

Economic policy makers have made similar mistakes before. That is what caused the Great Depression. There is not a lot of time left to get this right.

    Killing the Recovery, NYT, 28.9.2011,
    http://www.nytimes.com/2011/09/29/opinion/killing-the-recovery.html

 

 

 

 

 

Slump Alters Jobless Map in U.S.,

With South Hit Hard

 

September 26, 2011
The New York Times
By MICHAEL COOPER

 

When the unemployment rate rose in most states last month, it underscored the extent to which the deep recession, the anemic recovery and the lingering crisis of joblessness are beginning to reshape the nation’s economic map.

The once-booming South, which entered the recession with the lowest unemployment rate in the nation, is now struggling with some of the highest rates, recent data from the Bureau of Labor Statistics show.

Several Southern states — including South Carolina, whose 11.1 percent unemployment rate is the fourth highest in the nation — have higher unemployment rates than they did a year ago. Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession.

For decades, the nation’s economic landscape consisted of a prospering Sun Belt and a struggling Rust Belt. Since the recession hit, though, that is no longer the case. Unemployment remains high across much of the country — the national rate is 9.1 percent — but the regions have recovered at different speeds.

Now, with the concentration of the highest unemployment rates in the South and the West, some economists and researchers wonder if it is an anomaly of the uneven recovery or a harbinger of things to come.

“Because the recovery is so painfully slow, people may begin to think of the trends established during the recovery as normal,” said Howard Wial, a fellow at the Brookings Institution’s Metropolitan Policy Program who recently co-wrote an economic analysis of the nation’s 100 largest metropolitan areas. “Will people think of Florida, California, Nevada and Arizona as more or less permanently depressed? Think of the Great Lakes as being a renaissance region? I don’t know. It’s possible.”

The West has the highest unemployment in the nation. The collapse of the housing bubble left Nevada with the highest jobless rate, 13.4 percent, followed by California with 12.1 percent. Michigan has the third-highest rate, 11.2 percent, as a result of the longstanding woes of the American auto industry.

Now, though, of the states with the 10 highest unemployment rates, six are in the South. The region, which relied heavily on manufacturing and construction, was hit hard by the downturn.

Economists offer a variety of explanations for the South’s performance. “For a long time we tended to outpace the national average with regard to economic performance, and a lot of that was driven by, for lack of a better word, development and in-migration,” said Michael Chriszt, an assistant vice president of the Federal Reserve Bank of Atlanta’s research department. “That came to an abrupt halt, and it has not picked up.”

The long cycle of “lose jobs, gain jobs, lose jobs” that kept Georgia’s unemployment rate at 10.2 percent in August — the same as it was a year earlier — is illustrated by Union City, a small city on the outskirts of Atlanta.

It suffered a blow when the last store in its darkened mall, Sears, announced that it would soon close. But the city had other irons in the fire: a few big companies were hiring, and earlier this year Dendreon, a biotech company that makes a cancer drug, opened a plant there, lured in part by state and local subsidies.

Then, Dendreon announced this month that it would lay off more than 100 workers at the new plant as part of a national “restructuring.”

Union City, with a population of 20,000, now calls itself the place “Where Business Meets the World” and has been trying to lure companies by pointing out its low business taxes, various incentive programs and proximity to Hartsfield-Jackson Atlanta International Airport.

Steve Rapson, the city manager, said that the challenge there, as in much of America, has been to get employers to hire again. “It’s hard to get your mind around what can you do as a city to encourage future jobs and jobs growth,” he said.

The reordering of the nation’s economic fortunes can be seen in the Brookings analysis, which found that many auto-producing metropolitan areas in the Great Lakes states are seeing modest gains in manufacturing that are helping them recover from their deep slump, while Sun Belt and Western states with sharp drops in home values are still suffering. The areas that have been hurt the least since the recession, the study said, rely on government, education or energy production. Places that were less buoyed by the housing bubble were less harmed when it burst.

In Pennsylvania, the analysis found, the Pittsburgh area — which is heavily reliant on education and health care — is weathering the downturn better than the Philadelphia area. In New York, areas around long-struggling upstate cities like Buffalo and Rochester are recovering faster by some measures than the New York City metropolitan area. And the rate of recovery in Rust Belt areas around Youngstown and Akron, two Ohio cities that were hit hard, has outpaced that of former boomtowns like Colorado Springs and Tucson.

In a sign of how severe the downturn has been, the Brookings analysis found that only 16 of the nation’s 100 largest metropolitan areas have regained more than half of the jobs they lost during the recession.

The toll on the nation’s millions of unemployed people has been harsh, with the Census Bureau reporting that the United States had more people living in poverty last year than in any year since it began keeping records half a century ago.

Joblessness is taking a toll on states, too. This month, 27 states will have to pay $1.2 billion to the federal government in interest on the $37.5 billion that they borrowed in recent years to keep paying unemployment benefits.

What is most striking about the high unemployment rates, several economists said in interviews, is how they continue to afflict wide parts of the country.

“It just seems to be so pervasive across the country — except for the breadbasket area — that it’s hard to pick out anybody who is bouncing back,” said Randall W. Eberts, the president of the W. E. Upjohn Institute for Employment Research in Michigan.

Dr. Eberts pointed to another feature of the downturn: people are much less likely to leave their jobs voluntarily.

Before the recession, he said, about three million people voluntarily left their jobs each month. Now, around two million people do — leaving fewer openings for job seekers.

So what happened in South Carolina? Richard Kaglic, a regional economist with the Federal Reserve Bank of Richmond, Va., said the state’s lingering troubles reflect what happened when its once-thriving construction and manufacturing industries were hit hard by the recession. Mr. Kaglic, who is also a pilot, used an aviation metaphor to explain what he meant.

“If your nose is high, if you’re climbing faster and your engine cuts out, you fall farther and it takes you a longer time to recover,” he said. “The conditions we experienced in late 2008, 2009, are as close as you come to an engine-out situation in the economy.”

But Mr. Kaglic said that the recent return of manufacturing jobs was giving him hope, and that one reason for the high unemployment rate was that more people were now seeking work.

“I would look at it as our dreams are delayed,” he said, “rather than our dreams being denied.”

    Slump Alters Jobless Map in U.S., With South Hit Hard, NYT, 26.9.2011,
    http://www.nytimes.com/2011/09/27/us/unrelenting-downturn-is-redrawing-americas-economic-map.html

 

 

 

 

 

Data Show County’s Pain

as Economy Plummeted

 

September 22, 2011
The New York Times
By SABRINA TAVERNISE

 

GREENWOOD, S.C. — The Greenwood Mills Matthews Plant once employed three generations of Frances Flaherty’s family. Her grandmother, father and brother made textiles there — denim for jeans and khaki for military uniforms.

But it all but closed in 2007 when the economy soured, pitching dozens of workers into the ranks of the unemployed, and the plant now functions mainly as a bleak backdrop to Ms. Flaherty’s restaurant, the Southside Cafe, where diners gaze out at its red brick walls.

“It’s what held this town together, all the mills,” Ms. Flaherty said, watching another thinly attended lunch hour go by. “They just slowly but surely dwindled out.”

The falloff of the economy of Greenwood County, a district of almost 70,000 people that once pulsed with busy factories and mills, was the steepest in the country by two counts.

According to an analysis of Census Bureau figures made public on Thursday, its poverty rate more than doubled to 24 percent from 2007 to 2010, the largest increase for any county in the nation.

The decline also engulfed the middle class. Median household income plunged by 28 percent over the same period, shaving nearly $12,000 off the annual earnings of families here during the recession, according to the analysis, by Andrew A. Beveridge, a demographer at Queens College.

The numbers tell the story of a painful decade in Greenwood, which began with poverty levels that were close to the nation’s, and ended far above — after layoffs in textile mills, a foundry, restaurants and construction companies pummeled the county’s residents.

The number of workers in manufacturing alone fell by a quarter in the county from 2005 to 2009, according to a census survey of employers.

Those new facts are just sharp reminders to people here about what they have lived through.

“There just aren’t any jobs in Greenwood anymore,” said James Freeman, 58, a former textile mill worker. “My son can’t even get a job flipping burgers.”

Mr. Freeman worked for years in the textile mills, including the Matthews plant. He lost his last mill job in 2007 and was unable to find another. The work at one of the mills that employed him went to Argentina, he said, because the fabric was cheaper to produce there. Those workers were paid less, he was told, and got no benefits.

“That made me feel kind of bad,” said Mr. Freeman, who now collects disability. The mill’s closing “hurt a lot of people here in Greenwood.”

Disappointment like Mr. Freeman’s has welled up in areas of deep economic decline, infusing this election season with a blend of exhaustion and bitterness.

“Until we bring the companies back from overseas and stop protecting the world, we’re not going to be anything,” said Sam Stevenson, a retired construction worker, who could summon only expletives when asked about President Obama’s job plan.

In many ways, Greenwood is a typical American county. More than a quarter of its residents had at least some college education in 2009, roughly the same as the 27 percent nationally. It has a public university, which grants four-year degrees, a museum and a shopping mall.

But education has not seemed to ease the economic pain in an area whose fortunes were tied so closely to the textile industry that is now in such steep decline. Signs with the words “space available” are posted outside vacant factories on the road between here and Columbia, 80 miles to the east.

A red brick Baptist church on the outskirts of town commanded on its marquee, “Have your tools ready, and God will find you work.”

Apache Pawn and Gun, a pawn shop in town, is packed with items sold by people trying to make ends meet. Televisions, chain saws, bicycles and guitars are stacked from floor to ceiling. Chris Harris, the owner, said more middle-class people had come in to buy since the recession began.

“They’re saying, ‘Why should I buy a new chain saw when I could buy a used one?’ ” Mr. Harris said.

Ms. Flaherty said her cafe —its walls adorned with black-and-white photographs of mill workers and residents from happier times —is barely making it. When she opened in 2007, lunch used to bring lines out the door from workers at the plant and other businesses. Now it draws only a few diners. On Wednesday around 1:30 p.m., there were two.

And while housing prices have picked up — now a median of about $120,000 for the current listings compared with $109,000 in 2009 — the economy this year does not seem to be getting any better.

“It’s been bad this year,” said Kathy Green, owner of the Garden Grill, who said business was down significantly since the start of the recession. People order less, she said, and come in for the specials — $6 for a hamburger, fries and a drink.

Ms. Green said, “People just don’t have the money anymore.”

 

Barclay Walsh contributed reporting from Washington,

and Anne McQuary from Greenwood.

    Data Show County’s Pain as Economy Plummeted, NYT, 22.9.2011,
    http://www.nytimes.com/2011/09/22/us/greenwood-sc-had-steepest-economic-decline-in-us.html

 

 

 

 

 

The Cost of Inaction

 

September 13, 2011
The New York Times


The latest figures from the Census Bureau show the devastating cost of the recession and why putting Americans back to work must be Washington’s top priority.

The bureau reported on Tuesday that the number of people living in poverty swelled by 2.6 million between 2009 and 2010 to 46.2 million. That is a shocking 15.1 percent of the population — the highest share since 1993.

The middle class is also hurting. Last year, the income of the typical American household fell 2.3 percent to $49,445 — it’s third consecutive annual decline — capping a lost decade of stagnating earnings. Median household income hit its lowest level since 1996 — $3,800 a year less than its peak in 1999.

The poverty numbers are even bleaker for minorities. According to the bureau, 26.6 percent of Hispanic households and 27.4 percent of black households lived below the poverty line last year, compared with 13 percent for white households. Almost a third of families led by a single mother were below the poverty line, while 22 percent of children subsisted in poverty.

Poverty levels are even worse by historical standards. The government considers a family of four to be poor if it earned less than $22,314 in 2010 — about 30 percent of the median income. The original poverty line, introduced in the 1960s, was almost 50 percent of median incomes. Using that formula, 22 percent of Americans are now poor, about the same share as a half-century ago.

These numbers should jolt Washington into addressing the real economic crisis. The deficit must be addressed over time. But right now the problem is too few jobs, not too much government spending. Indeed, government safety-net programs — so often sneered at by Republicans — are all that is keeping millions from falling into complete despair. Food stamps helped feed 40 million families in 2010, 50 percent more than in 2007. Slashing such spending now will only put more people out of work and drive more families below the poverty line.

It took too long, but President Obama is now pushing back. His new proposals to extend unemployment insurance benefits for millions of people, invest in public infrastructure and provide incentives for employers to increase their payrolls should add jobs and help the jobless make ends meet. Congressional Republicans, predictably, are complaining about the cost and about raising taxes on the wealthy to pay for it.

With 14 million Americans out of work and 46 million living in poverty, the real human cost of more obstruction and inaction is undeniable and inexcusable.

    The Cost of Inaction, NYT, 14.9.2011,
    http://www.nytimes.com/2011/09/14/opinion/fixing-the-economy-cost-of-inaction.html

 

 

 

 

 

Time to Say It:

Double Dip Recession May Be Happening

 

August 4, 2011
The New York Times
By FLOYD NORRIS

 

Double dip may be back.

It has been three decades since the United States suffered a recession that followed on the heels of the previous one. But it could be happening again. The unrelenting negative economic news of the past two weeks has painted a picture of a United States economy that fell further and recovered less than we had thought.

When what may eventually be known as Great Recession I hit the country, there was general political agreement that it was incumbent on the government to fight back by stimulating the economy. It did, and the recession ended.

But Great Recession II, if that is what we are entering, has provoked a completely different response. Now the politicians are squabbling over how much to cut spending. After months of wrangling, they passed a bill aimed at forcing more reductions in spending over the next decade.

If this is the beginning of a new double dip, it will have two significant things in common with the dual recessions of 1980 and 1981-82.

In each case the first recession was caused in large part by a sudden withdrawal of credit from the economy. The recovery came when credit conditions recovered.

And in each case the second recession began at a time when the usual government policies to fight economic weakness were deemed unavailable. Then, the need to fight inflation ruled out an easier monetary policy. Now, the perceived need to reduce government spending rules out a more accommodating fiscal policy.

The American economy fell into what was at first a fairly mild recession at the end of 2007. But the downturn turned into a worldwide plunge after the failure of Lehman Brothers in September 2008 led to the vanishing of credit for nearly all borrowers not deemed super-safe. Banks in the United States and other countries needed bailouts to survive.

The unavailability of credit caused a decline in world trade volumes of a magnitude not seen since the Great Depression, and nearly every economy went into recession.

But it turned out that businesses overreacted. While sales to customers fell, they did not decline as much as production did.

That fact set the stage for an economic rebound that began in mid-2009, with the National Bureau of Economic Research, the arbiter of such things, determining that the recession ended in June of that year. Manufacturers around the world reported rapidly rising orders.

Until recently, most observers believed the American economy was in a slow recovery, albeit one with very disappointing job growth. The official figures on gross domestic product showed the United States economy grew to a record size in the final three months of 2010, having erased the loss of 4.1 percent in G.D.P. from top to bottom.

Then last week the government announced its annual revision to the numbers for the last several years. New government surveys indicated Americans had spent less than previously estimated in 2009 and 2010 on a wide range of things, including food, clothing and computers. Tax returns showed Americans even cut back on gambling. The recession now appears to have been deeper — a top-to-bottom fall of 5.1 percent — and the recovery even less impressive. The economy is still smaller than it was in 2007.

In June, more American manufacturers said new orders fell than rose, according to a survey by the Institute for Supply Management. The margin was small, but the survey had shown rising orders for 24 consecutive months. Manufacturers in most European countries, including Germany and Britain, also reported weaker new orders.

Back in 1980, a recession was started when the government — despairing of its failure to bring down surging inflation rates — invoked controls aimed at limiting the expansion of credit and making it more costly for banks to make loans. Those controls proved to be far more effective than anyone expected, and the economy promptly tanked. In July the credit controls were ended, and the economic research bureau later determined that the recession ended that month.

By the first quarter of 1981 the economy was larger than it had been at the previous peak.

But little had been done about inflation, and the Federal Reserve was determined to slay that dragon. With interest rates high, home sales plunged in late 1981 to the lowest level since the government began collecting the data in 1963. Now they are even lower.

There is, of course, no assurance that a new recession has begun or will do so soon, and a positive jobs report on Friday morning could revive some optimism. But concerns have grown that the essential problems that led to the 2007-09 recession were not solved, just as inflation remained high throughout the 1980 downturn. Housing prices have not recovered, and millions of Americans owe more in mortgage debt than their homes are worth. Extremely low interest rates helped to push up corporate profits, but companies have hired relatively few people.

In any other cycle, the recent spate of poor economic news would have resulted in politicians vying with one another to propose programs to revive growth. President Obama has called for more spending on infrastructure, but there appears to be little chance Congress will take any action. The focus in Washington is now on deciding where to reduce spending, not increase it.

There have been some hints that the Federal Reserve might be willing to resume purchasing government bonds, which it stopped doing in June, despite opposition from conservative members of Congress. But the revised economic data may indicate that the previous program — known as QE2, for quantitative easing — had even less impact than had been thought. With short-term interest rates near zero, the Fed’s monetary policy options are limited.

Government stimulus programs historically have often appeared to be accomplishing little until the cumulative effect suddenly helps to power a self-sustaining recovery. This time, the best hope may be that the stimulus we have already had will prove to have been enough.

    Time to Say It: Double Dip Recession May Be Happening, NYT, 4.8.2011,
    http://www.nytimes.com/2011/08/05/business/economy/
    double-dip-recession-may-be-returning.html

 

 

 

 

 

Blundering Toward Recession:

Beyond the Debt Stalemate

 

July 15, 2011
The New York Times

 

“Catastrophic.” “Calamitous.” “Major crisis.” “Self-inflicted wound.” Those are some of the ways Ben Bernanke, the chairman of the Federal Reserve, has described the fallout if Congress fails to raise the debt limit by the Aug. 2 deadline.

In Congressional testimony this week, Mr. Bernanke also warned that the Fed would not be able to fully counter the damage from a default, including the possibility that spiking interest rates would roil borrowers worldwide and worsen the federal budget deficit by making it costlier to finance the nation’s debt.

That’s not all of it. Brinkmanship over the debt limit is only one of many epic economic policy blunders now in the making. Even if lawmakers raise the debt limit on time, the economy is weak and getting weaker, as evidenced by slowing growth and rising unemployment.

Instead of coming up with policies to strengthen the economy, the Republicans are demanding deep, immediate spending cuts, which would only add to current weakness. The White House, meanwhile, has suggested cuts should be phased in slowly and has said that more near-term help would be good for the economy. That is a better approach. But President Obama has done too little to argue the case, on Capitol Hill or with the public.

Upfront spending cuts could make sense if the budget deficit were the cause of the current economic weakness. If it were, interest rates would be rising, not at generational lows, as the government competed with the private sector. The real cause is lack of consumer demand in the face of stagnant wages, job uncertainty and the continuing payback of household debt from the bubble years. Without strong and steady consumer demand, businesses will not hire, and a self-sustaining recovery cannot take hold.

In such a situation, government must fill the gap with spending on relief and recovery measures. Premature spending cuts will only make things worse by pulling dollars out of a frail economy. Contrary to the claims of Republicans, and some Democrats, that the nation cannot afford new spending, the government could, and should, borrow cheaply at today’s low rates in an effort to bolster demand and, by extension, support jobs.

A place to start would be to extend what little stimulus remains on the books, including the $57 billion-a-year federal unemployment insurance program and the $112 billion payroll tax cut for employees. Both are scheduled to expire at the end of 2011, despite the fact that conditions have deteriorated since they were enacted last year.

Another crucial step would be to reauthorize the highway trust fund, at least at existing levels. The fund, which is paid for mainly by the federal gasoline tax, will allocate $53 billion to states in 2011 for roads and mass transit, supporting millions of jobs. The House version of the highway bill calls for deep cuts, and the better Senate version has not garnered enough Republican support to pass.

It is also past time for lawmakers to move forward with plans for a federal infrastructure bank to provide seed money for major public works.

In his testimony, Mr. Bernanke emphasized that the deficit was a serious problem, but not an immediate one. He is right. It can be solved over time, with spending cuts and tax increases, as the economy recovers.

Recovery, however, requires the creation of millions more jobs, starting now, than the current economy is capable of generating. It is time for the government to step up. If it doesn’t, the weakening economy is bound to become even weaker.

    Blundering Toward Recession: Beyond the Debt Stalemate, NYT, 15.7.2011,
    http://www.nytimes.com/2011/07/16/opinion/16sat1.html

 

 

 

 

 

Absorbing the Pain

 

February 25, 2011
The New York Times
By BOB HERBERT

 

Philadelphia

Lynda Hiller teared up. “We’re struggling real bad,” she said, “and it’s getting harder every day.”

A handful of people were sitting around a dining room table in a row house in North Philadelphia on Wednesday, talking about the problems facing working people in America. The setting outside the house on West Harold Street was grim. The remnants of a snowstorm lined the curbs and a number of people, obviously down on their luck, were moving about the struggling neighborhood. Some were panhandling.

The small gathering had been arranged by a group called Working America, which is affiliated with the A.F.L.-C.I.O., but the people at the meeting did not belong to unions. They were just there to talk in an atmosphere of mutual support.

What struck me about the conversation was the way people talked in normal tones about the equivalent of a hurricane ripping through their lives, leaving little but destruction in its wake.

Ms. Hiller had come in from Allentown. She’s 63 years old and still undergoing treatment for breast cancer. Her husband, Howard, who was not at the meeting, had been a long-distance truck driver for 35 years before losing his job in 2007, the same year Ms. Hiller received her diagnosis. Mr. Hiller thought at the time that with all of his experience he would find another job pretty quickly. He was mistaken.

“He looked for two years,” Ms. Hiller said. “He applied every place he could, sometimes four or five times at the same company. He went everywhere, to every job fair you can think of, to every place where there was even a mention of an opening. But for every job that came available, there were 20 people or more who showed up for it.”

Last fall, Mr. Hiller took a part-time job as a dishwasher at a Red Lobster restaurant. “It’s a job,” Ms. Hiller said. “It’s not fancy. It’s not truck driving.”

And it was not enough for them to keep their home. Ms. Hiller lost her job at a bank when she became ill. With both paychecks gone, meeting the mortgage became impossible. The Hillers lost their home and are now living day to day. “If my husband can get 30 hours of work in a week, then maybe we can pay some bills,” Ms. Hiller said. “If he can’t, we can’t. We’ve downsized our lives so much.”

The meeting was in the home of Elizabeth Lassiter, a certified nursing assistant whose job is in Hatfield, Pa., about 45 minutes north of Philadelphia. She doesn’t earn a lot or get benefits, but it’s a big step up from last year when she was working part time in Warminster and for a while had to sleep in her car.

“Back then I was working for a nursing agency and they kept saying they didn’t have full-time work,” she said. Until she could raise enough money for an apartment, the car was her only option. “I needed someplace to lay my head,” she said. “It was very hard.”

These are the kinds of stories you might expect from a country staggering through a depression, not the richest and supposedly most advanced society on earth. If these were exceptional stories, there would be less reason for concern. But they are in no way extraordinary. Similar stories abound throughout the United States.

Among the many heartening things about the workers fighting back in Wisconsin, Ohio and elsewhere is the spotlight that is being thrown on the contemptuous attitude of the corporate elite and their handmaidens in government toward ordinary working Americans: police officers and firefighters, teachers, truck drivers, janitors, health care aides, and so on. These are the people who do the daily grunt work of America. How dare we treat them with contempt.

It would be a mistake to think that this fight is solely about the right of public employees to collectively bargain. As important as that issue is, it’s just one skirmish in what’s shaping up as a long, bitter campaign to keep ordinary workers, whether union members or not, from being completely overwhelmed by the forces of unrestrained greed in this society.

The predators at the top, billionaires and millionaires, are pitting ordinary workers against one another. So we’re left with the bizarre situation of unionized workers with a pension being resented by nonunion workers without one. The swells are in the background, having a good laugh.

I asked Lynda Hiller if she felt generally optimistic or pessimistic. She was quiet for a moment, then said: “I don’t think things are going to get any better. I think we’re going to hit rock bottom. The big shots are in charge, and they just don’t give a darn about the little person.”

    Absorbing the Pain, NYT, 25.2.2011,
    http://www.nytimes.com/2011/02/26/opinion/26herbert.html

 

 

 

 

 

Across the U.S.,

Long Recovery Looks Like Recession

 

October 12, 2010
New York Times
By MICHAEL POWELL and MOTOKO RICH

 

This is not what a recovery is supposed to look like.

In Atlanta, the Bank of America tower, the tallest in the Southeast, is nearly a fifth vacant, and bank officials just wrestled a rent cut from the developer. In Cherry Hill, N.J., 10 percent of the houses on the market are so-called short sales, in which sellers ask for less than they owe lenders. And in Arizona, in sun-blasted desert subdivisions, owners speak of hours cut, jobs lost and meals at soup kitchens.

Less than a month before November elections, the United States is mired in a grim New Normal that could last for years. That has policy makers, particularly the Federal Reserve, considering a range of ever more extreme measures, as noted in the minutes of its last meeting, released Tuesday. Call it recession or recovery, for tens of millions of Americans, there’s little difference.

Born of a record financial collapse, this recession has been more severe than any since the Great Depression and has left an enormous oversupply of houses and office buildings and crippling debt. The decision last week by leading mortgage lenders to freeze foreclosures, and calls for a national moratorium, could cast a long shadow of uncertainty over banks and the housing market. Put simply, the national economy has fallen so far that it could take years to climb back.

The math yields somber conclusions, with implications not just for this autumn’s elections but also — barring a policy surprise or economic upturn — for 2012 as well:

¶At the current rate of job creation, the nation would need nine more years to recapture the jobs lost during the recession. And that doesn’t even account for five million or six million jobs needed in that time to keep pace with an expanding population. Even top Obama officials concede the unemployment rate could climb higher still.

¶Median house prices have dropped 20 percent since 2005. Given an inflation rate of about 2 percent — a common forecast — it would take 13 years for housing prices to climb back to their peak, according to Allen L. Sinai, chief global economist at the consulting firm Decision Economics.

¶Commercial vacancies are soaring, and it could take a decade to absorb the excess in many of the largest cities. The vacancy rate, as of the end of June, stands at 21.4 percent in Phoenix, 19.7 percent in Las Vegas, 18.3 in Dallas/Fort Worth and 17.3 percent in Atlanta, in each case higher than last year, according to the data firm CoStar Group.

Demand is inert. Consumer confidence has tumbled as many are afraid or unable to spend. Families are still paying off — or walking away from — debt. Mark Zandi, chief economist of Moody’s Analytics, estimates it will be the end of 2011 before the amount of income that households pay in interest recedes to levels seen before the run-up. Credit card delinquencies are rising.

“No wonder Americans are pessimistic and unhappy,” said Mr. Sinai. “The only way we are going to get in gear is to face up to the reality that we are entering a period of austerity.”

This dreary accounting should not suggest a nation without strengths. Unemployment rates have come down from their peaks in swaths of the United States, from Vermont to Minnesota to Wisconsin. Port traffic has increased, and employers have created an average of 68,111 jobs a month this year.

After plummeting in 2009, the stock market has spiraled up, buoying retirement accounts and perhaps the spirits of middle-class Americans. As a measure of economic health, though, that gain is overstated. Robert Reich, the former labor secretary, notes that the most profitable companies in the domestic stock indexes generate about 40 percent of their revenue from abroad.

Few doubt the American economy remains capable of electrifying growth, but few expect that any time soon. “We still have a lot of strengths, from a culture of entrepreneurship and venture capitalism, to flexible labor markets and attracting immigrants,” said Barry Eichengreen, an economist at the University of California, Berkeley. “But we’re going to be living with the overhang of our financial and debt problems for a long, long time to come.”

New shocks could push the nation into another recession or deflation. “We are in a situation where our vulnerability to any new problem is great,” said Carmen M. Reinhart, a professor of economics at the University of Maryland.

So troubles ripple outward, as lost jobs, unsold houses and empty offices weigh down the economy and upend lives. Struggles in Arizona, New Jersey and Georgia echo broadly.

 

Florence, Ariz.

In 2005, Arizona ranked, as usual, second nationally in job growth behind Nevada, its economy predicated on growth. The snowbirds came and construction boomed and land stretched endless and cheap. Then it stopped.

This year, Arizona ranks 42nd in job growth. It has lost 287,000 jobs since the recession began, and the fall has been calamitous.

Renee Wheaton, 38, sits in an old golf cart on the corner of Tangerine and Barley Roads in her subdivision in the desert, an hour south of Phoenix. Her next-door neighbor, an engineer, just lost his job. The man across the street is unemployed.

Her family is not doing so well either. Her husband’s hours have been cut by 15 percent, leaving her family of five behind on water and credit card bills — more or less on everything except the house and car payment. She teaches art, but that’s not much in demand.

“I say to myself ‘This can’t be happening to us: We saved, we worked hard and we’re under tremendous stress,’ ” Ms. Wheaton says. “My husband is a very hard-working man but for the first time, he’s having real trouble.”

Arizona’s poverty rate has jumped to 19.6 percent, the second-highest in the nation after Mississippi. The Association of Arizona Food Banks says demand has nearly doubled in the last 18 months.

Elliott D. Pollack, one of Arizona’s foremost economic forecasters, said: “You had an implosion of every sector needed to survive. That’s not going to get better fast.”

To wander exurban Pinal County, which is where Florence is located, is to find that the unemployment rate tells just half the story. Everywhere, subdivisions sit in the desert, some half-built and some dreamy wisps, like the emerald green putting green sitting amid acres of scrub and cacti. Signs offer discounts, distress sales and rent with the first and second month free.

Discounts do not help if your income is cut in half. Construction workers speak of stringing together 20-hour weeks with odd jobs, and a 45-year-old woman who was a real estate agent talks of her job making minimum wage bathing elderly patients. Many live close to the poverty line, without the conveniences they once took for granted. Pinal’s unemployment rate, like that of Arizona, stands at 9.7 percent, but state officials say that the real rate rises closer to 20 percent when part-timers and those who have stopped looking for work are added in.

At an elementary school near Ms. Wheaton’s home, an expansion of the school’s water supply was under way until thieves sneaked in at night and tore the copper pipes out of the ground to sell for scrap.

Five miles southwest, in Coolidge, a desert town within view of the distant Superstition Mountains, demand has tripled at Tom Hunt’s food pantry. Some days he runs out.

Henry Alejandrez, 60, is a roofer who migrated from Texas looking for work. “It’s gotten real bad,” he says. “I’m a citizen, and you’re lucky if you get minimum wage.”

Mary Sepeda, his sister, nods. She used to drive two hours to clean newly constructed homes before they were sold. That job evaporated with the housing market. (Arizona issued 62,500 housing permits several years ago; it gave out 8,400 last year.)

“It’s getting crazy,” she says, holding up a white plastic bag of pantry food. “How does this end?”

You put that question to Mr. Pollack, the forecaster. “We won’t recover until we absorb 80,000 empty houses and office buildings and people can borrow again,” he says.

When will that be?

“I’m forecasting recovery by 2013 to 2015,” he says.

 

Cherry Hill, N.J.

The housing market in this bedroom community just across the border from Philadelphia never leapt to the frenzied heights of Miami Beach or Las Vegas. But even if foreclosure notices are not tacked to every other door, a malaise has settled over the market. Home prices have fallen by 16 percent since 2006, and houses now take twice as long to sell as they did five years ago.

That’s enough to inflict pain on homeowners who need to sell because of a job loss or drop in income. Some are being forced to get rid of their houses in short sales, asking less than they owe on a mortgage. As of last week, 10 percent of all listings in this well-tended suburb were being offered as short sales.

Chrysanthemums bloomed in boxes on the porch of one of those homes as a real estate broker unlocked the front door. In the kitchen, children’s chores were listed neatly on an erasable white board. Dinner simmered in a Crock-Pot on the counter.

There were few signs of the financial distress that prompted the owners to put their four-bedroom colonial on the market for less than they paid five years ago.

The colonial’s owners, James and Patricia Furrow, bought near the top of the market in 2005 for $289,900. Mr. Furrow, 48, retired in July after 26 years as a corrections officer and supplements his pension with work as a handyman. But his income is spotty, and his wife, who works in a school cafeteria, does not earn enough to cover the mortgage on the house where they live with their three children.

They have already missed a payment; they want to sell the house in hopes their lender will forgive the shortfall between their loan balance and the lower sale price. They are asking $279,900.

“When we did buy, the market was still moving pretty good,” said Mr. Furrow. “Then it got to the point where people said it is not going to last. And of course it didn’t last.”

Some of the homes being offered at distressed prices are dragging down prices for less troubled homeowners who hope to sell. And with foreclosures now in disarray, the market could be further weakened. “Even someone who is trying to sell a normal, well-maintained house is at the mercy of these low prices,” said Walter Bud Crane, an agent with Re/Max of Cherry Hill.

So the houses sit, awaiting offers that rarely materialize. According to Mr. Crane, the average number of days that homes sit on the market has nearly doubled, to 62 this year from 32 in 2005. Buyers are chary, not sure if their jobs are secure. Open houses draw sparse crowds.

In Camden County, where Cherry Hill sits, unemployment is near 10 percent. Several large employers have closed or conducted huge layoffs, and others have pruned hours. With Gov. Chris Christie reining in spending, government workers are jittery.

Real estate agents say it has rarely been a better time to buy: interest rates are at record lows, house prices have fallen and the selection is large.

Tara Stewart-Becker, a 28-year-old financial services manager, said she and her husband would love to buy a sprawling fixer-upper just three blocks from the narrow colonial they purchased four years ago in Riverton, which backs onto the Delaware River.

But a bad kitchen flood and a loan to pay for repairs has left Ms. Becker and her husband, Eric, owing more on their mortgage than the house is currently worth. Even though the couple make far more money than they did when they bought their house and could afford a larger loan and renovations, they cannot sell.

“I would gladly take a new mortgage and stimulate the economy for the rest of my life,” Ms. Becker said.

“Unfortunately, there isn’t anything that a government or a bank can do,” she added. “You just have to settle for less and wait.”

 

Atlanta

Long fast-growing, no-holds-barred Atlanta has burned to the ground before, figuratively and in reality, and each time it was a phoenix rising. But this recession has cut deeper than any since the Great Depression and left Atlanta’s commercial and high-end condo real estate in an economic coma.

Over all, assuming a robust growth rate, industry leaders say it could take 12 years for Atlanta to absorb excess commercial space.

“That one — see it?” Alan Wexler points to a gleaming blue tower as he drives. “A Chicago bank took it over six months ago. Sold at a 40 percent discount.”

“And over there” — he juts his chin at a boarded-up hotel topped by a Chick-fil-A fast-food restaurant crown. “That was going to be a condo. They just shut it down and walked away.”

Mr. Wexler, a wiry and peripatetic real estate data analyst, describes it all on a drive down Peachtree Road, Atlanta’s posh commercial spine.

He starts in the Buckhead neighborhood, which has more than two million square feet of vacant commercial space. A billboard outside one discounted condo tower promises “New Pricing from the $290s!” There are towers half-empty and towers in receivership. Office buildings that once sold for $85 million now retail for $35 million.

Approaching downtown, Mr. Wexler hits the brakes and points to an older, white marble building. “See that one? It’s the Fed Reserve. That’s where they sit, look, sweat and wonder: How did we get into this mess?”

That’s a question much on the minds and lips of residents.

The commercial vacancy rate in Buckhead is near 20 percent, and the Atlanta region has added jobs only at the low end.

Mike Alexander, research division chief for the Atlanta Regional Commission, posed the question: “When do we start to add premium jobs again?”

Lawrence L. Gellerstedt III, chief executive of Cousins Properties, sits in an office high atop an elegant Philip Johnson tower, with a grand view of the Atlanta commercial corridor running north. He does not see improvement on the horizon.

“We’re all wondering what gets the economy producing jobs and growth again,” he says. “Atlanta always was the fair-haired child of real estate growth and now, it’s ‘O.K., poster boy, you’re getting yours.’ ”

Small banks are a particular disaster, 43 having gone under in Georgia since 2008. (Federal regulators closed 129 nationally this year, up from 25 last year.) Real estate was the beginning, the middle and the end of the troubles. In one deal, dozens of Atlanta banks invested in Merrill Ranch, a 4,508-acre tract of desert south of Phoenix.

The deal imploded and took a lot of banks with it.

“No one was demanding documents or reading the fine print, and mortgage banks were fat and happy,” recalls John Little, a developer. “Well, that train couldn’t keep running.”

He has a ringside seat on this debacle, as he sits in the office of a handsome condo complex he built in west Atlanta. He faced price discounts so deep that he decided to rent it instead.

Nationwide banks have no interest in lending to local developers, and the regional banks are desperate for cash and calling in their loans.

Mr. Little got lucky; he bought out his loan and kept his property. “Most of my generation of builders has gone under,” he said. “It’s still spiraling out of control.”

    Across the U.S., Long Recovery Looks Like Recession, NYT, 12.10.2010,
    http://www.nytimes.com/2010/10/13/business/economy/13econ.html

 

 

 

 

 

Recession May Be Over,

but Joblessness Remains

 

September 20, 2010
The New York Times
By CATHERINE RAMPELL

 

The United States economy has lost more jobs than it has added since the recovery began over a year ago.

Yes, you read that correctly.

The downturn officially ended, and the recovery officially began, in June 2009, according to an announcement Monday by the official arbiter of economic turning points. Since that point, total output — the amount of goods and services produced by the United States — has increased, as have many other measures of economic activity.

But nonfarm payrolls are still down 329,000 from their level at the recession’s official end 15 months ago, and the slow growth in recent months means that the unemployed still have a long slog ahead.

“We started from a deep hole,” said James Poterba, an economics professor at M.I.T. and a member of the National Bureau of Economic Research’s Business Cycle Dating Committee, which declared the recession’s end. “And clearly the bounce-back has not been immediate after hitting this trough.”

The declaration of the recession’s end confirms what many suspected: The 2007-9 recession was not only the longest post-World War II recession, but also the deepest, in terms of both job losses and at least one measure of output declines.

The announcement also implies that any contraction that might lie ahead would be a separate and distinct recession, and one that the Obama administration could not claim to have inherited. While economists generally say such a double-dip recession seems unlikely, new monthly estimates of gross domestic product, released by two committee members, show that output shrank in May and June, the most recent months for which data are available. Output and other factors would have to shrink for a longer period of time before another contraction might be declared.

Even without a full-blown double dip in the economy, the recovery thus far has been so anemic that the job picture seems likely to stagnate, and perhaps even get worse, in the near future.

Many forecasters estimate that output needs to grow over the long run by about 2.5 percent to keep the unemployment rate, now at 9.6 percent, constant. The economy grew at an annual rate of just 1.6 percent in the second quarter of this year, and private forecasts indicate growth will not be much better in the third quarter. (The Business Cycle Dating Committee itself does not engage in forecasting.)

“The amount of unemployment we’ve already got and the slowness of recovery lead to predictions that we could have 9-plus percent unemployment even through the next presidential election,” said Robert J. Gordon, an economics professor at Northwestern University and a committee member.

“What’s really unique about this recession is the amount of unemployment in combination with the slowness of the recovery,” he said. “That’s just not happened before. We had a sharp recession followed by a sharp recovery in the 1980s. And in ’91 and ’01 we had slow recoveries, but those recessions were shallow recessions, so the slowness didn’t matter much.”

All three of these most recent recoveries have been known as jobless recoveries, as employment growth has significantly lagged output growth. In this recovery, the job market bottomed six months after economic output bottomed. That is still not nearly as much of a lag as experienced after the 2001 recession, when it took the job market 19 months to turn around after output improved.

This new pattern of jobless recoveries has led to some complaints that employment should play a more prominent role in dating business cycles and to criticism that a jobless recovery is not truly a recovery at all. Business Cycle Dating Committee members have been reluctant to change their criteria too drastically, though, because they want to maintain consistency in the official chronology of contractions and expansions.

While all three recent recoveries have been weak for employment, the job market has to cover the most ground from the latest recession.

From December 2007 to June 2009, the American economy lost more than 5 percent of its nonfarm payroll jobs, the largest decline since World War II. And through December 2009, the month that employment hit bottom, the nation had lost more than 6 percent of its jobs.

The unemployment rate, which comes from a different survey, peaked last October at 10.1 percent. The postwar high was in 1982, at 10.8 percent. But the composition of the work force was very different in the 1980s — it was younger, and younger people tend to have higher unemployment rates — and so if adjusted for age, unemployment this time around actually looks much worse.

The broadest measure of unemployment, including people who are reluctantly working part time when they wish to be working full time and those who have given up looking for work altogether, also was at its highest level since World War II.

There is some debate, though, about whether this recession was the worst in terms of output.

Adjusted for inflation, output contracted more than in any other postwar period, according to Robert E. Hall, a Stanford economics professor and committee chairman.

But some economists say that a better measure would be the gap between where output is and where it could have been if growth had been uninterrupted.

“It’s definitely not as deep as 1981-82 when measured relative to the economy’s potential growth rate,” Mr. Gordon said.

Besides employment, nearly every indicator that the committee considers simultaneously reached a low point in June 2009, which made that month a relatively easy selection as the official turning point, Mr. Gordon said. The committee previously met in April but had decided that the data were inconclusive.

In its statement on Monday affirming the recession’s end, the bureau took care to note that the recession, by definition, meant only the period until the economy reached its low point — not a return to its previous vigor.

“In declaring the recession over, we’re not at all saying the unemployment rate, or anything else, has returned to normal,” said James H. Stock, an economics professor at Harvard and a member of the business cycle committee.

“We clearly still have a long ways to go.”

    Recession May Be Over, but Joblessness Remains, NYT, 20.9.2010,
    http://www.nytimes.com/2010/09/21/business/economy/21econ.html

 

 

 

 

 

How to End the Great Recession

 

September 2, 2010
The New York Times
By ROBERT B. REICH

 

Berkeley, Calif.

THIS promises to be the worst Labor Day in the memory of most Americans. Organized labor is down to about 7 percent of the private work force. Members of non-organized labor — most of the rest of us — are unemployed, underemployed or underwater. Friday’s jobs report from the Bureau of Labor Statistics will almost surely show fewer new jobs created in August than the 125,000 needed just to keep up with growth of the potential work force.

The national economy isn’t escaping the gravitational pull of the Great Recession. None of the standard booster rockets are working: near-zero short-term interest rates from the Fed, almost record-low borrowing costs in the bond market, a giant stimulus package and tax credits for small businesses that hire the long-term unemployed have all failed to do enough.

That’s because the real problem has to do with the structure of the economy, not the business cycle. No booster rocket can work unless consumers are able, at some point, to keep the economy moving on their own. But consumers no longer have the purchasing power to buy the goods and services they produce as workers; for some time now, their means haven’t kept up with what the growing economy could and should have been able to provide them.

This crisis began decades ago when a new wave of technology — things like satellite communications, container ships, computers and eventually the Internet — made it cheaper for American employers to use low-wage labor abroad or labor-replacing software here at home than to continue paying the typical worker a middle-class wage. Even though the American economy kept growing, hourly wages flattened. The median male worker earns less today, adjusted for inflation, than he did 30 years ago.

But for years American families kept spending as if their incomes were keeping pace with overall economic growth. And their spending fueled continued growth. How did families manage this trick? First, women streamed into the paid work force. By the late 1990s, more than 60 percent of mothers with young children worked outside the home (in 1966, only 24 percent did).

Second, everyone put in more hours. What families didn’t receive in wage increases they made up for in work increases. By the mid-2000s, the typical male worker was putting in roughly 100 hours more each year than two decades before, and the typical female worker about 200 hours more.

When American families couldn’t squeeze any more income out of these two coping mechanisms, they embarked on a third: going ever deeper into debt. This seemed painless — as long as home prices were soaring. From 2002 to 2007, American households extracted $2.3 trillion from their homes.

Eventually, of course, the debt bubble burst — and with it, the last coping mechanism. Now we’re left to deal with the underlying problem that we’ve avoided for decades. Even if nearly everyone was employed, the vast middle class still wouldn’t have enough money to buy what the economy is capable of producing.

Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.

Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.

This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.

THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures — Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage — leveled the playing field.

In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs.

By contrast, little has been done since 2008 to widen the circle of prosperity. Health-care reform is an important step forward but it’s not nearly enough.

What else could be done to raise wages and thereby spur the economy? We might consider, for example, extending the earned income tax credit all the way up through the middle class, and paying for it with a tax on carbon. Or exempting the first $20,000 of income from payroll taxes and paying for it with a payroll tax on incomes over $250,000.

In the longer term, Americans must be better prepared to succeed in the global, high-tech economy. Early childhood education should be more widely available, paid for by a small 0.5 percent fee on all financial transactions. Public universities should be free; in return, graduates would then be required to pay back 10 percent of their first 10 years of full-time income.

Another step: workers who lose their jobs and have to settle for positions that pay less could qualify for “earnings insurance” that would pay half the salary difference for two years; such a program would probably prove less expensive than extended unemployment benefits.

These measures would not enlarge the budget deficit because they would be paid for. In fact, such moves would help reduce the long-term deficits by getting more Americans back to work and the economy growing again.

Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.


Robert B. Reich, a secretary of labor in the Clinton administration, is a professor of public policy at the University of California, Berkeley, and the author of the forthcoming “Aftershock: The Next Economy and America’s Future.”

    How to End the Great Recession, NYT, 2.9.2010,
    http://www.nytimes.com/2010/09/03/opinion/03reich.html

 

 

 

 

 

This Is Not a Recovery

 

August 26, 2010
The New York Times
By PAUL KRUGMAN

 

What will Ben Bernanke, the Fed chairman, say in his big speech Friday in Jackson Hole, Wyo.? Will he hint at new steps to boost the economy? Stay tuned.

But we can safely predict what he and other officials will say about where we are right now: that the economy is continuing to recover, albeit more slowly than they would like. Unfortunately, that’s not true: this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact.

The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?

The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.

All of this is obvious. Yet policy makers are in denial.

After its last monetary policy meeting, the Fed released a statement declaring that it “anticipates a gradual return to higher levels of resource utilization” — Fedspeak for falling unemployment. Nothing in the data supports that kind of optimism. Meanwhile, Tim Geithner, the Treasury secretary, says that “we’re on the road to recovery.” No, we aren’t.

Why are people who know better sugar-coating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.

In the case of the Fed, admitting that the economy isn’t recovering would put the institution under pressure to do more. And so far, at least, the Fed seems more afraid of the possible loss of face if it tries to help the economy and fails than it is of the costs to the American people if it does nothing, and settles for a recovery that isn’t.

In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small. True, it was enough to limit the depth of the slump — a recent analysis by the Congressional Budget Office says unemployment would probably be well into double digits now without the stimulus — but it wasn’t big enough to bring unemployment down significantly.

Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come.

So what should officials be doing, aside from telling the truth about the economy?

The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.

The administration has less freedom of action, since it can’t get legislation past the Republican blockade. But it still has options. It can revamp its deeply unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families — yes, Republicans will howl, but they’re doing that anyway. It can finally get serious about confronting China over its currency manipulation: how many times do the Chinese have to promise to change their policies, then renege, before the administration decides that it’s time to act?

Which of these options should policy makers pursue? If I had my way, all of them.

I know what some players both at the Fed and in the administration will say: they’ll warn about the risks of doing anything unconventional. But we’ve already seen the consequences of playing it safe, and waiting for recovery to happen all by itself: it’s landed us in what looks increasingly like a permanent state of stagnation and high unemployment. It’s time to admit that what we have now isn’t a recovery, and do whatever we can to change that situation.

    This Is Not a Recovery, NYT, 26.8.2010,
    http://www.nytimes.com/2010/08/27/opinion/27krugman.html

 

 

 

 

 

Going to Extremes

as the Downturn Wears On

 

August 6, 2010
The New York Times
By MICHAEL COOPER

 

Plenty of businesses and governments furloughed workers this year, but Hawaii went further — it furloughed its schoolchildren. Public schools across the state closed on 17 Fridays during the past school year to save money, giving students the shortest academic year in the nation and sending working parents scrambling to find care for them.

Many transit systems have cut service to make ends meet, but Clayton County, Ga., a suburb of Atlanta, decided to cut all the way, and shut down its entire public bus system. Its last buses ran on March 31, stranding 8,400 daily riders.

Even public safety has not been immune to the budget ax. In Colorado Springs, the downturn will be remembered, quite literally, as a dark age: the city switched off a third of its 24,512 streetlights to save money on electricity, while trimming its police force and auctioning off its police helicopters.

Faced with the steepest and longest decline in tax collections on record, state, county and city governments have resorted to major life-changing cuts in core services like education, transportation and public safety that, not too long ago, would have been unthinkable. And services in many areas could get worse before they get better.

The length of the downturn means that many places have used up all their budget gimmicks, cut services, raised taxes, spent their stimulus money — and remained in the hole. Even with Congress set to approve extra stimulus aid, some analysts say states are still facing huge shortfalls.

Cities and states are notorious for crying wolf around budget time, and for issuing dire warnings about draconian cuts that never seem to materialize. But the Great Recession has been different. Around the country, there have already been drastic cuts in core services like education, transportation and public safety, and there are likely to be more before the downturn ends. The cuts that have disrupted lives in Hawaii, Georgia and Colorado may be extreme, but they reflect the kinds of cuts being made nationwide, disrupting the lives of millions of people in ways large and small.

 

EDUCATION:

HAWAII FURLOUGHS ITS CHILDREN

MILILANI, Hawaii — It was a Friday, and Maria Marte, an administrator for an online college that caters to members of the military, should have been at her office at a nearby Army hospital. Her daughters, Nira, 11, and Sonia, 9, should have been in school.

Instead, Ms. Marte was sitting with a laptop in the dining room of her home in this neatly manicured suburb of Honolulu. “Did you already send your registration in?” she asked a client on the phone, trying to speak above the peals of laughter coming from the backyard, where the girls were having a water-balloon fight with some friends.

It was the 17th, and last, Furlough Friday of the year, the end of a cost-cutting experiment that closed schools across the state, outraging parents and throwing a wrench into that most delicate of balances for families with children: the weekly routine

“I have to pay attention to the customers, and make sure that I’m understanding what they need,” said Ms. Marte, 37, whose husband, Odalis, an Army major, had been deployed in Afghanistan for nearly a year. Then she nodded at the window, toward the girls. “But at the same time, I have to make sure that they’re not killing each other.”

For those 17 Fridays, parents reluctantly worked from home or used up vacation and sick days. Others enlisted the help of grandparents. Many paid $25 to $50 per child each week for the new child care programs that had sprung up.

Children, meanwhile, adjusted to a new reality of T.G.I.T. Getting them up for school on Mondays grew harder. Fridays were filled with trips to pools and beaches, hours of television and Wii, long stretches alone for older children, and, occasionally, successful attempts to get them to do their homework early.

But if three-day-weekends in Hawaii sound appealing in theory, many children said that they wound up missing school.

“I’m really not a big fan of furloughs,” said Nira Marte, a fifth grader, explaining that she missed the time with her friends and her teacher.

Four-day weeks have been used by a small number of rural school districts in the United States, especially since the oil shortage of the 1970s. During the current downturn, their ranks have swelled to more than 120 districts, and more are weighing the change.

But Hawaii is an extreme case. It shut schools not only in rural areas but also in high-rise neighborhoods in Honolulu. Suffering from steep declines in tourism and construction, and owing billions of dollars to a pension system that has only 68.8 percent of the money it needs to cover its promises to state workers, Hawaii instituted the furloughs even after getting $110 million in stimulus money for schools.

Unlike most districts with four-day weeks, Hawaii did not lengthen the hours of its remaining school days: its 163-day school year was the shortest in the nation.

The furloughs were originally supposed to last two years, but the outcry was so great — some parents were arrested staging sit-ins at the office of Gov. Linda Lingle, a Republican — that a deal was hammered out to restore the days next year.

On the last furlough day, Ms. Marte toggled back and forth between her girls — making them pizza, taking them to swim practice — and a stream of e-mails and calls. At one point, a soldier on the mainland was interrupted when his baby started bawling.

“Don’t worry, that’s fine,” Ms. Marte reassured him. “I’m in the same boat.”

 

TRANSPORTATION:

A COUNTY SHUTS ITS BUS SYSTEM

RIVERDALE, Ga. — Kelly Smith was reading a library copy of “The Politician,” the tell-all about John Edwards, as his public bus rumbled through a suburb of Atlanta. It was heading toward the airport, where he could switch to a train to his job downtown, in the finance department of the Atlanta Public Schools system. But his mind was drifting.

It was March 31, the last day of public bus service. Clayton County had decided to balance its budget by shutting down C-Tran, the bus system, stranding 8,400 daily riders. Mr. Smith, 45, like two-thirds of the riders, had no car. He needed a plan.

“I think that what they’re doing is criminal,” Mr. Smith said as his 504 bus filled up. “I’ll figure something out, but I see a lot of people here who don’t have an out.”

The next morning, this is what he had figured out: a state-run express bus stopped around three miles from his apartment in Riverdale. So Mr. Smith rose at 5, walked past the defunct C-Tran bus stop just outside his apartment complex and hiked the miles of dark, deserted streets, many of which had no sidewalks.

“If I get hit by a car, it’s my fault,” he said as he crossed a highway. “Who wants to start their day off like this? This is why I don’t get up and jog.”

Mr. Kelly was determined to get to the job he had landed in November, and to get there on time. “I was out of work for two and half years, with the economic crisis,” he said. “So the last thing I want to do is walk away from a job.”

Around the country, public transportation has taken a beating during the downturn. Fares typically cover less than half the cost of each ride, and the state and local taxes that most systems depend on have been plummeting.

In most places, that has meant longer waits for more crowded, dirtier and more expensive trains and buses. But it meant the end of the line in Clayton County, a struggling suburb south of Atlanta where “Gone With the Wind” was set and which is now home to most of Hartsfield-Jackson Atlanta International Airport.

The county — hit hard by the subprime mortgage crisis and the wave of foreclosures that followed — decided it could no longer afford spending roughly $8 million a year on its bus system, which started in 2001. It hoped that some other entity — like the state — would pick up the cost.

If the threat to shut the system down was a game of chicken, no one blinked.

Now all five bus routes are gone, and riders are trying to adjust.

Jennifer McDaniel, a hostess at a Chili’s in the airport, was forced to spend her tax refund, and take out a big loan, to buy a car. Jaime Tejada, 36, a Delta flight attendant, wondered why transit was so much better in the countries he flies to.

And Tierra Clark, 19, who studies dental hygiene and works five nights a week at the Au Bon Pain at the airport, was left with an unwanted new expense. “I’ll have to call a taxi from now on — $13.75 every night,” Ms. Clark said, as she rode the very last C-Tran bus home.

Now there is talk of levying a new sales tax so the county can join the Metropolitan Atlanta Rapid Transit Authority, which it voted not to join when it was created nearly four decades ago. That could get the buses up and running again.

Even if that happens, though, it could be years off — too late for Mr. Smith. After spending a carless Easter vacation trying to figure out a better way to get to work, or even to get his groceries, he ended up quitting his first job in two and a half years and moving just outside Dallas, where his girlfriend had landed a job with a bank.

“A lot of people are leaving Riverdale,” he said.

 

PUBLIC SAFETY: LIGHTS OUT IN COLORADO SPRINGS

COLORADO SPRINGS — It was when the street lights went out, Diane Cunningham said, that the trouble started.

Her tires were slashed, she said. Her car was broken into. Strange men showed up on her porch. Her neighborhood had grown deserted at night, ever since four streetlights in a row were put out on Airport Road, the street outside her mobile home park.

That is why Ms. Cunningham, 41, and her son Jonathan, 22, were carrying a flat-screen television out of their mobile home on a recent afternoon. “I’m going to pawn this,” Ms. Cunningham said, “to get a shotgun.”

It is impossible to say whether the darkness had contributed to any of the events that frightened the Cunninghams. But ever since Colorado Springs shut off a third of its 24,512 streetlights this winter to save $1.2 million on electricity — while reducing the size of its police force — many resident have said that they feel less safe.

A few miles down Airport Road a 62-year-old man, Esteban Garcia, was shot to death in April when he was robbed outside his family’s taqueria and grocery in a parking lot that had lost the illumination of its nearest streetlight. Gaspar Martinez, a neighboring shopkeeper, said that he believed the lack of the light was partly to blame.

“You figure the robbers think that if it’s dark, it’s the best time to hit,” said Mr. Martinez, 34, whose store, Ruskin Liquor, is in the same small strip mall. Mr. Martinez said that he put more lights up outside his store after the shooting.

The police, who arrested several suspects, said that there was no indication that the doused light had played a role in the crime — or, indeed, in any crimes in Colorado Springs, which remains safer than most cities of its size. But this might be a case, they said, where perception is as important as reality.

“All the sociologists have said this for years: what matters to people isn’t really the number of reported crimes, it’s their perception of safety,” said the city’s police chief, Richard W. Myers. “And let’s say we don’t see any bump in crime — that would be a good thing. But people don’t feel as safe. They’re already telling us that, even if the numbers don’t bear that out. So do we have a problem? I think so.”

Chief Myers said he worried that if law-abiding citizens stopped going out at night or visiting parks, the city’s deserted open spaces could attract more criminals.

One of most influential policing concepts in recent years has been the “broken windows” theory, which holds that addressing minor crimes and signs of disorder can head off bigger problems down the road. Colorado Springs is taking a different tack.

To close a budget gap — the city’s voters, many of whom favor smaller government, turned down a property tax increase in November, and a taxpayer’s bill of rights makes it hard for city officials to raise taxes — Colorado Springs has stopped collecting trash in its parks, stopped watering many medians on its roads and reduced its police force.

The sprawling city of roughly 400,000 at the foot of Pike’s Peak — which covers 194 square miles — made national news when it auctioned off its police helicopters. But less-heralded police cuts could have more impact: the force, which had 687 officers two years ago, is down to 643 and dropping. At any given time, the department estimates that there is a 23 percent chance that all units will be busy.

So it has reduced the number of detectives who investigate property crimes, cut the number of officers assigned to the schools and eliminated units that tracked juvenile offenders and caught fugitives. Officers no longer respond to the scene of most burglaries, at least if they are not in progress.

At the same time, the city joined others — from Fitchburg, Mass., to Santa Rosa, Calif., and began turning off streetlights. Several recent studies have suggested that streetlights help reduce crime — something residents here say is obvious.

Natalie Bartling, a new mother, could not believe it when the light outside her home was shut off in April. Ms. Bartling, 38, had successfully lobbied for the light five years ago after a wave of vandalism and petty thefts hit her middle-class block. So this time she called daily until the city agreed to turn it back on.

“When it got shut off, it was like missing something,” she said on a recent night, standing under its glow. “Part of your life.”

    Going to Extremes as the Downturn Wears On, NYT, 6.8.2010,
    http://www.nytimes.com/2010/08/07/us/07cutbacksWEB.html

 

 

 

 

 

Still in the Time of Economic Anxiety

 

August 4, 2010
 

The New York Times

 

To the Editor:

Re “Welcome to the Recovery,” by Timothy F. Geithner, the secretary of the Treasury (Op-Ed, Aug. 3):

Forgive me, Mr. Geithner, if I remain skeptical. Recovering? I think a very temporary remission is more accurate.

“We suffered a terrible blow, but we are coming back,” you say. No one I know went anywhere. Their savings went, their investments went, their jobs went, their homes went. And those who took them — and received obscene bonuses for doing so — are coming back for even more.

My question is, Where are we going? We, the public, the average person upon whom the health and well-being of the nation rests. The reality is that there are not enough good jobs for everyone, housing prices are still far too high, lenders are making it increasingly hard to borrow, credit card companies are still being allowed to charge exorbitant interest and no one that I know is saving; every penny goes to keep body and soul together.

Insecurity — financial, emotional and physical — is creating increasing health problems, yet crucial public services, which could at least help in the short term, are being cut to the bone.

What I have learned in the last few years is that the private sector plays fast and loose with the public welfare, and no one seems to care. The gulf between rich and poor is huge and getting wider every day.

Coming back? We’re still on the edge, and it’s still crumbling.

Susan A. McGregor
North Kingston, R.I., Aug. 3, 2010



To the Editor:

Re “Defining Prosperity Down,” by Paul Krugman (column, Aug. 2):

Maybe now we can finally admit that “trickle down” economics doesn’t work. We’ve had 25 years of tax cuts (cuts in income taxes, estate taxes and capital gains taxes) for the wealthiest Americans. The myth was that the wealthy would invest that money in ways that would create more jobs and prosperity for the rest of us. It’s not working, obviously.

Our return for trickling so much of our wealth upward was supposed to be good jobs and a solid income for the middle class. Instead we’ve got the wealthy playing hedge fund roulette on Wall Street, while one-sixth of American workers are unemployed or underemployed.

Trickle-down policies increased the wealth gap, but didn’t create jobs. The only time in the past decade that we’ve approached full employment was when the middle class went into debt and spent virtually 100 percent of its income or even more, as it did over the four years before 2008. That “mortgage and credit” bubble taught us that the real “jobs engine” is middle-class spending.

To get our economy running again (instead of wheezing along), we need to eliminate the Bush tax cuts, eliminate the tax break for hedge fund managers and establish a meaningful estate tax. Keep that money out of the Wall Street casino; invest instead in the middle class.

John Ranta
Hancock, N.H., Aug. 2, 2010



To the Editor:

Re “99 Weeks Later, Jobless Have Only Desperation” (front page, Aug. 3):

The story of Alexandra Jarrin’s odyssey from middle-class striver to unemployed and homeless graphically illustrates the terrifying underside of what’s left of the American dream.

A week after the 9/11 terror attacks, I was laid off from my position as head of public relations at a publishing house. For the next year and a half, with increasing desperation, I tried to claw my way back into a corporate life in which I had thrived for nearly 20 years.

As it turns out, I was actually one of the lucky ones. My skills were transferable to the entrepreneurial world, and I eventually started an independent public relations firm. But what I learned from that experience is just how far one can fall — and is allowed to fall — in the 21st-century United States.

There is very little safety net in this country. For those who make it, this can still be the land of opportunity. But for those who, for whatever reason, lose their grip on what we take for security — job, home, bank account — the drop is very long indeed, with no one or nothing to catch you.

Alan Winnikoff
Sleepy Hollow, N.Y., Aug. 3, 2010



To the Editor:

In what state of callous cruelty is this country living when it can allow a sizable number of its people to live in cars or on the streets because their unemployment has run out during this long and protracted recession — all while it still manages to send expensive armaments halfway around the world?

Should we start a citizens’ emergency fund, or a clearinghouse where people can donate available housing, or a sponsorship program where you can help someone for six months, since the government does not seem to have the will to do any of this?

Forget about will, how about heart? Where is it?

Shameful, shameful, shameful.

Lynn Lauber
Bridport, Vt., Aug. 3, 2010



To the Editor:

Re “Four Deformations of the Apocalypse,” by David Stockman (Op-Ed, Aug. 1):

During the past 30 years in which Republicans largely dominated the White House and Congress, these so-called conservatives have mortgaged our country to the brink of bankruptcy via reckless spending, borrowing from abroad and giving tax breaks to the rich only to run up today’s obscene national debt and trigger our current deep recession.

And when President Obama increases deficits to stimulate the moribund economy — a strategy recommended by virtually all reputable economists — the irresponsible Republicans have the nerve to blame his administration for our national debt.

Will the American voters see through this charade? Given our propensity to run up personal debt to buy stuff we don’t need with money we don’t have, I fear that the answer is no. What a legacy we are leaving future generations.

James G. Goodale
Houston, Aug. 1, 2010



To the Editor:

To David Stockman’s perceptive analysis, one must add the basic Republican financial strategy dating back at least to Ronald Reagan: Pushing up the deficit makes it difficult or impossible for the Democrats to finance, increase or develop programs disfavored by Republicans. It’s that simple.

The Republican arguments for deficit reduction fly in the face of fact, as the Bush administration’s policies so clearly show. “Tax and spend” Democrats have been upstaged by “spend and don’t tax” Republicans. The cynicism exceeds imagination.

Doug Giebel
Big Sandy, Mont., Aug. 1, 2010

    Still in the Time of Economic Anxiety, NYT, 4.8.2010,
    http://www.nytimes.com/2010/08/05/opinion/l05econ.html

 

 

 

 

 

Welcome to the Recovery

 

August 2, 2010
The New York Times
By TIMOTHY F. GEITHNER

 

Washington

THE devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs, businesses and homes. The scars of the crisis are fresh, and every new economic report brings another wave of anxiety. That uncertainty is understandable, but a review of recent data on the American economy shows that we are on a path back to growth.

The recession that began in late 2007 was extraordinarily severe, but the actions we took at its height to stimulate the economy helped arrest the freefall, preventing an even deeper collapse and putting the economy on the road to recovery.

From the start, President Obama made clear that recovery from a crisis of this magnitude would not come quickly and that the recovery would not follow a straight line. We saw that this past spring, when the European fiscal crisis posed a serious challenge to the markets and to business confidence, dampening investment and the rate of growth here.

While the economy has a long way to go before reaching its full potential, last week’s data on economic growth show that large parts of the private sector continue to strengthen. Business investment and consumption — the two keys to private demand — are getting stronger, better than last year and better than last quarter. Uncertainty is still inhibiting investment, but business capital spending increased at a solid annual rate of about 17 percent.

Together, private consumption and fixed investment contributed about 3.25 percent to growth. Even the surge in imports, which lowered the rate of increase of G.D.P., actually reflects healthy and growing American demand.

As the economists Ken Rogoff and Carmen Reinhart have written, recoveries that follow financial crises are typically a hard climb. That is reality. The process of repair means economic growth will come slower than we would like. But despite these challenges, there is good news to report:

• Exports are booming because American companies are very competitive and lead the world in many high-tech industries.

• Private job growth has returned — not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months.

• Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow.

• American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn’t sustainable.

• The auto industry is coming back, and the Big Three — Chrysler, Ford and General Motors — are now leaner, generating profits despite lower annual sales.

• Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth.

• The government’s investment in banks has already earned more than $20 billion in profits for taxpayers, and the TARP program will be out of business earlier than expected — and costing nearly a quarter of a trillion dollars less than projected last year.

We all understand and appreciate that these signs of strength in parts of the economy are cold comfort to those Americans still looking for work and to those industries, like construction, hit hardest by the crisis. But these economic measures, nonetheless, do represent an encouraging turnaround from the frightening future we faced just 18 months ago.

The new data show that this recession was even deeper than previously estimated. The plunge in economic activity started an entire year before President Obama took office and was accelerating at the end of 2008, when G.D.P. fell at an annual rate of roughly 7 percent.

Panicked by the collapse in demand and financing and fearing a prolonged slump, the private sector cut payrolls and investment savagely. The rate of job loss worsened with time: by early last year, 750,000 jobs vanished every month. The economic collapse drove tax revenue down, pushing the annual deficit up to $1.3 trillion by last January.

The economic rescue package that President Obama put in place was essential to turning the economy around. The combined effect of government actions taken over the past two years — the stimulus package, the stress tests and recapitalization of the banks, the restructuring of the American car industry and the many steps taken by the Federal Reserve — were extremely effective in stopping the freefall and restarting the economy.

According to a report released last week by Alan Blinder and Mark Zandi, advisers to President Bill Clinton and Senator John McCain, respectively, the combined actions since the fall of 2007 of the Federal Reserve, the White House and Congress helped save 8.5 million jobs and increased gross domestic product by 6.5 percent relative to what would have happened had we done nothing. The study showed that government action delivered a powerful bang for the buck, and that the bank rescue on its own will turn a profit for taxpayers.

We have a long way to go to address the fiscal trauma and damage across the country, and we will need to monitor the ups and downs in the economy month by month. The share of workers who have been unemployed for six months or more is at its highest level since 1948, when the data was first recorded, and we must do more to ensure that they have the skills they need to re-enter the 21st-century economy. Small businesses are still battling a tough climate. State and local governments are still hurting.

There are urgent tasks to be undertaken to reinforce the recovery, and Congress should move now to help small business, to assist states in keeping teachers in the classroom, to increase investments in public infrastructure, to promote clean energy and to increase exports. And while making smart, targeted investments in our future, we must also cut the deficit over the next few years and make sure that America once again lives within its means.

These are considerable challenges, but we are in a much stronger position to face them today than when President Obama took office. By taking aggressive action to fix the financial system, reduce growth in health care costs and improve education, we have put the American economy on a firmer foundation for future growth.

And as the president said last week, no one should bet against the American worker, American business and American ingenuity.

We suffered a terrible blow, but we are coming back.


Timothy F. Geithner is the secretary of the Treasury.

    Welcome to the Recovery, NYT, 2.8.2010,
    http://www.nytimes.com/2010/08/03/opinion/03geithner.html

 

 

 

 

 

UK recession even deeper

than first thought

Six successive quarters
of negative economic growth
from spring 2008 until autumn 2009
were the toughest for the economy
since the Great Depression of the 1930s

 

Monday 12 July 2010 17.12 BST
Guardian.co.uk
Larry Elliott, economics editor
This article was published on guardian.co.uk at 17.12 BST on Monday 12 July 2010.
It was last modified at 17.12 BST on Monday 12 July 2010.

 

The deepest recession in Britain's post-war history was even more severe than previously feared, the government said today.


Fresh information collected by the Office for National Statistics showed that the peak to trough decline in output was 6.4% of gross domestic product rather than the original 6.2% estimate.


The new figures confirmed that the six successive quarters of negative growth from spring 2008 until autumn 2009 were the toughest for the economy since the Great Depression of the 1930s, harsher even than the slump of the early 1980s.


Growth resumed in the final three months of 2009 as the UK economy responded to the emergency cuts in interest rates, the cheaper pound and higher government spending. The ONS made no changes to its estimate of a 0.4% expansion in the fourth quarter of last year or its 0.3% growth estimate for the first quarter of 2010, but said the role of government spending in the first three months of this year in underpinning the economy had been more significant than first thought.


Consumer spending fell slightly in the first three months of 2010, with individuals running down their savings in order to finance purchases.


Despite the pick up in activity at the end of last year, output was 0.2% lower at the end of the first quarter of 2010 than it had been a year earlier.


Jeremy Cook, chief economist at World First, said: "Although the headline figure remained unchanged at 0.3%, government spending was revised up from 1.1% to 1.5% signifying that the recovery is still very reliant on state spending and that consumers are not stepping up to the plate quite yet."


Howard Archer, chief economist at IHS Global Insight, said: "The picture remains one of only gradual recovery so far following a record six quarters of deep overall recession through to the third quarter of 2009. The main message coming from the revised data was that the recession was even deeper than previously reported."

    UK recession even deeper than first thought, G, 12.7.2010,
    http://www.guardian.co.uk/business/2010/jul/12/uk-
    recession-deeper-than-first-thought

 

 

 

 

 

The Third Depression

 

June 27, 2010
The New York Times
By PAUL KRUGMAN

 

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.

But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.

Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine.

It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

    The Third Depression, NYT, 27.6.2010,
    http://www.nytimes.com/2010/06/28/opinion/28krugman.html

 

 

 

 

 

U.S. Economy

Lost Only 11,000 Jobs

in November

 

December 5, 2009
The New York Times
By JAVIER C. HERNANDEZ

 

In the strongest jobs report since the recession began, the government reported Friday that the nation’s employers had all but stopped shedding jobs in November, taking some of the pressure off of President Obama to come up with a jobs creation program.

The Labor Department reported Friday that the United States economy shed 11,000 jobs in November, and the unemployment rate fell to 10 percent, down from 10.2 percent in October.

The government also significantly revised September and October numbers. September was adjusted to show a loss of 139,000 jobs instead of 219,000, and October 111,000 instead of 190,000.

Though the pace has been declining since a peak in January, the November number was surprising. Economists have been expecting a turning point to come in the late spring or summer, with employers finally adding workers as a recovery takes hold. The last time the number was this good was December 2007, when the economy added 120,000 jobs.

“We’re moving toward stability in the labor market and the end of the tremendous firing that has plagued America,” said Allen L. Sinai, the founder of Decision Economics, a research firm. “But it’s going to be bleak for years. While it is going to be better than what we’ve seen, it’s still going to be terrible.”

A large number of employees are working fewer hours than they would like because many companies are operating below capacity and have resisted adding staff until orders turn up and the incipient recovery seems likely to endure. Indeed, a broader measure of unemployment fell in November to 17.2 percent, from 17.5 percent in October. This broader measure covers not only those seeking work but those whose hours have been cut and those too discouraged to look for work.

The number of Americans facing long-term unemployment, which includes people who cannot find work for 27 weeks or more, has been at record highs in recent months, reaching 5.6 million in October. It was more than 5.9 million people in November, or 38.3 of percent of those unemployed. Once hiring resumes, those workers are likely to be among the last to land jobs.

“You create this class of people who essentially become permanently unemployed and can’t get back in,” said Nigel Gault, chief domestic economist at IHS Global Insight. “You have people who have lost contact with the labor market, whose skills are not relevant for jobs for the future, who employers regard with skepticism because they have been out of work for so long.”

In recent months, the economy has shown modest signs of stability in manufacturing and construction — each a big source of job loss in the nearly two years since the recession began. But consumer spending remains tepid even as holiday shopping gets under way.

On Thursday, President Obama convened a jobs summit and said he would announce proposals next week to strengthen employment. “We cannot hang back and hope for the best,” the president said, though he added “our resources are limited.”

Economists generally say that the worst of the recession has passed, and most forecast mild growth into next year. But that does not change the economic reality for millions of Americans, who must deal with piles of unpaid bills, worries about unexpected medical expenses and concerns about losing their homes.

Kathy M. Henry, 39, who lives in a subsidized apartment on the South Side of Chicago, was laid off from her job as an administrative assistant at an advertising agency two years ago. Since then, she says, she has applied for more than 500 jobs. She has received a $1,200 monthly unemployment check since August of last year, which she describes as not enough to support herself and two of her children who live with her.

“It’s a constant cycle,” she said. “I’ve applied everywhere, from big corporations to minute corporations, and I don’t even get an e-mail back. I’m worried people see me as old and out of touch and decrepit.”

Earlier this week, Ms. Henry’s son, a high school senior, came home with a packet of class photographs. The $40 cost was beyond her means, she said, so she decided against purchasing a memento of her son’s senior year.

In Canada on Friday, the government reported that the country’s economy added more jobs than expected in November, erasing the losses in October. Statistics Canada reported a net employment gain of 79,000 in November, topping expectations of a 15,000 gain. The unemployment rate fell to 8.5 percent from 8.6 percent in October.

    U.S. Economy Lost Only 11,000 Jobs in November, 5.12.2009,
    http://www.nytimes.com/2009/12/05/business/economy/05jobs.html

 

 

 

 

 

Running in the Shadows

Recession Drives

Surge in Youth Runaways

 

October 26, 2009
The New York Times
By IAN URBINA

 

MEDFORD, Ore. — Dressed in soaked green pajamas, Betty Snyder, 14, huddled under a cold drizzle at the city park as several older boys decided what to do with her.

Betty said she had run away from home a week earlier after a violent argument with her mother. Shivering and sullen-faced, she vowed that she was not going to sleep by herself again behind the hedges downtown, where older homeless men and methamphetamine addicts might find her.

The boys were also runaways. But unlike them, Betty said, she had been reported missing to the police. That meant that if the boys let her stay overnight in their hidden tent encampment by the freeway, they risked being arrested for harboring a fugitive.

“We keep running into this,” said one of the boys, Clinton Anchors, 18. Over the past year, he said, he and five other teenagers living together on the streets had taken under their wings no fewer than 20 children — some as young as 12 — and taught them how to avoid predators and the police, survive the cold and find food.

“We always first try to send them home,” said Clinton, who himself ran away from home at 12. “But a lot of times they won’t go, because things are really bad there. We basically become their new family.”

Over the past two years, government officials and experts have seen an increasing number of children leave home for life on the streets, including many under 13. Foreclosures, layoffs, rising food and fuel prices and inadequate supplies of low-cost housing have stretched families to the extreme, and those pressures have trickled down to teenagers and preteens.

Federal studies and experts in the field have estimated that at least 1.6 million juveniles run away or are thrown out of their homes annually. But most of those return home within a week, and the government does not conduct a comprehensive or current count.

The best measure of the problem may be the number of contacts with runaways that federally-financed outreach programs make, which rose to 761,000 in 2008 from 550,000 in 2002, when current methods of counting began. (The number fell in 2007, but rose sharply again last year, and the number of federal outreach programs has been fairly steady throughout the period.)

Too young to get a hotel room, sign a lease or in many cases hold a job, young runaways are increasingly surviving by selling drugs, panhandling or engaging in prostitution, according to the National Runaway Switchboard, the federally-financed national hot line created in 1974. Legitimate employment was hard to find in the summer of 2009; the Labor Department said fewer than 30 percent of teenagers had jobs.

In more than 50 interviews over 11 months, teenagers living on their own in eight states told of a harrowing existence that in many cases involved sleeping in abandoned buildings, couch-surfing among friends and relatives or camping on riverbanks and in parks after fleeing or being kicked out by families in financial crisis.

The runaways spend much of their time avoiding the authorities because they assume the officials are trying to send them home. But most often the police are not looking for them as missing-person cases at all, just responding to complaints about loitering or menacing. In fact, federal data indicate that usually no one is looking for the runaways, either because parents have not reported them missing or the police have mishandled the reports.

In Adrian, Mich., near Detroit, a 16-year-old boy was secretly living alone in his mother’s apartment, though all the utilities had been turned off after she was arrested and jailed for violating her parole by bouncing a check at a grocery store.

In Huntington, W.Va., Steven White, 15, said that after casing a 24-hour Wal-Mart to see what time each night the cleaning crew finished its rounds, he began sleeping in a store restroom.

“You’re basically on the lam,” said Steven, who said he had left home because of physical abuse that increased after his father lost his job this year. “But you’re a kid, so it’s pretty hard to hide.”

 

Between Legal and Illegal

Survival on the streets of Medford, a city of 76,000 in southwest Oregon, requires runaways to walk a fine line between legal and illegal activity, as a few days with a group of them showed. Even as they sought help from social service organizations, they guarded their freedom jealously.

Petulant and street savvy, they were children nonetheless. One girl said she used a butter knife and a library card to break into vacant houses. But after she began living in one of them, she ate dry cereal for dinner for weeks because she did not realize that she could use the microwave to boil water for Ramen noodles. Another girl was childlike enough to suck her thumb, but dangerous enough to carry a switchblade.

They camped in restricted areas, occasionally shoplifted and regularly smoked marijuana. But they stayed away from harder drugs or drug dealing, and the older teenagers fiercely protected the younger runaways from sexual or other physical threats.

In waking hours, members of the group split their time among a park, a pool hall and a video-game arcade, sharing cigarettes. When in need, they sometimes barter: a sleeveless jacket for a blanket, peanut butter for extra lighter fluid to start campfires on soggy nights.

Betty Snyder, the newcomer in the park, said she had bitten her mother in a recent fight. She said she often refused to do household chores, which prompted heated arguments.

“I’m just tired of it all, and I don’t want to be in my house anymore,” she said, explaining why she had run away. “One month there is money, and the next month there is none. One day, she is taking it out on me and hitting me, and the next day she is ignoring me. It’s more stable out here.”

Members of the group said they sometimes made money by picking parking meters or sitting in front of parking lots, pretending to be the attendant after the real one leaves. When things get really desperate, they said, they climb into public fountains to fish out coins late at night. On cold nights, they hide in public libraries or schools after closing time to sleep.

Many of the runaways said they had fled family conflicts or the strain of their parents’ alcohol or drug abuse. Others said they left simply because they did not want to go to school or live by their parents’ rules.

“I can survive fine out here,” Betty said as she brandished a switchblade she pulled from her dirty sweatshirt pocket. At a nearby picnic table was part of the world she and the others were trying to avoid: a man with swastikas tattooed on his neck and an older homeless woman with rotted teeth, holding a pit bull named Diablo.

But Betty and another 14-year-old, seeming not to notice, went off to play on a park swing.

Around the country, outreach workers and city officials say they have been overwhelmed with requests for help from young people in desperate straits.

In Berks County, Pa., the shortage of beds for runaways has led county officials to consider paying stipends to families willing to offer their couches. At drop-in centers across the country, social workers describe how runaways regularly line up when they know the food pantry is being restocked.

In Chicago, city transit workers will soon be trained to help the runaways and other young people they have been finding in increasing numbers, trying to escape the cold or heat by riding endlessly on buses and trains.

“Several times a month we’re seeing kids being left by parents who say they can’t afford them anymore,” said Mary Ferrell, director of the Maslow Project, a resource center for homeless children and families in Medford. With fewer jobs available, teenagers are less able to help their families financially. Relatives and family friends are less likely to take them in.

While federal officials say homelessness over all is expected to rise 10 percent to 20 percent this year, a federal survey of schools showed a 40 percent increase in the number of juveniles living on their own last year, more than double the number in 2003.

At the same time, however, many financially troubled states began sharply cutting social services last year. Though President Obama’s $787 billion economic stimulus package includes $1.5 billion to address the problem of homelessness, state officials and youth advocates say that almost all of that money will go toward homeless families, not unaccompanied youths.

“As a society, we can pay a dollar to deal with these kids when they first run away, or 20 times that in a matter of years when they become the adult homeless or incarcerated population,” said Barbara Duffield, policy director for the National Association for the Education of Homeless Children and Youth.

 

‘You Traveling Alone?’

Maureen Blaha, executive director of the National Runaway Switchboard, said that while most runaways, like those in Medford, opt to stay in their hometowns, some venture farther away and face greater dangers. The farther they get from home and the longer they stay out, the less money they have and the more likely they are to take risks with people they have just met, Ms. Blaha said.

“A lot of small-town kids figure they can go to Chicago, San Francisco or New York because they can disappear there,” she said.

Martin Jaycard, a Port Authority police officer in New York, sees himself as a last line of defense in preventing that from happening.

Dressed in scraggly blue jeans and an untucked open-collar shirt, Officer Jaycard, a seven-year police veteran, is part of the Port Authority’s Youth Services Unit. His job is to catch runaways as they pass through the Port Authority Bus Terminal, the nation’s busiest.

“You’re the last person these kids want to see,” he said, estimating that his three-officer unit stops at least one runaway a day at the terminal.

Pausing to look at a girl waiting for a bus to Salt Lake City, Officer Jaycard noticed a nervous look on her face and the overstuffed suitcases that hinted more at a life change than a brief stay.

“Hey, how’s it going?” he said to the girl, gently, as he pulled a badge hanging around his neck from under his shirt. “You traveling alone?”

“Yes,” she replied, without a glimmer of nervousness. “I’m 18,” she quickly added before being asked.

But the girl carried no identification. The only phone number she could produce for someone who could verify her age was disconnected. And after noticing that the last name she gave was different from the one on her bags, the officer took her upstairs to the police station.

When she arrived, she burst into tears.

“Please, I’m begging you not to send me home,” she pleaded as she sobbed into her hands. While listening, Officer Jaycard and the social worker on duty began contacting city officials to investigate her situation, and found her a place at a city shelter. “You have no idea what my father will do to me for having tried to run away,” she said, describing severe beatings at home and threats to kill her if she ever tried to leave.

The girl turned out to be 14 years old, from Queens. Shaking her head in frustration, she added, “I should have just waited outside the terminal and no one would have known I was missing.”

In all likelihood, she was right.

 

Invisible Names

Lacking the training or the expertise to spot runaways, most police officers would not have stopped the girl waiting for the bus. Even if they had, her name probably would not have been listed in the federal database called the National Crime Information Center, or N.C.I.C., which among other things tracks missing people.

Federal statistics indicate that in more than three-quarters of runaway cases, parents or caretakers have not reported the child missing, often because they are angry about a fight or would simply prefer to see a problem child leave the house. Experts say some parents fear that involving the police will get them or their children into trouble or put their custody at risk.

And in 16 percent of cases, the local police failed to enter the information into the federal database, as required under federal law, according to a review of federal data by The New York Times.

Among the 61,452 names that were reported to the National Center for Missing and Exploited Children from January 2004 to January 2009, there were about 9,625 instances involving children whose missing-persons reports were not entered into the N.C.I.C., according to the review by The Times. If the names are not in the national database, then only local police agencies know whom to look for.

Police officials give various reasons for not entering the data. The software is old and cumbersome, they say, or they have limited resources and need to prioritize their time. In many cases, the police said, they do not take runaway reports as seriously as abductions, in part because runaways are often fleeing family problems. The police also say that entering every report into the federal database could make a city’s situation appear to be more of a problem than it is.

But in 267 of the cases around the nation for which the police did not enter a report into the database, the children remain missing. In 58, they were found dead.

“If no one knows they’re gone, who is going to look for them?” said Tray Williams, a spokesman for the Louisiana Office of Child Services, whose job it was to take care of 17-year-old Cleveland Randall.

On Feb. 6, Cleveland ran away from his foster care center in New Orleans and took a bus to Mississippi. His social workers reported him missing, but the New Orleans police failed to enter the report into the N.C.I.C. Ten days later, Cleveland was found shot to death in Avondale, La.

“These kids might as well be invisible if they aren’t in N.C.I.C.,” said Ernie Allen, the director of the National Center for Missing and Exploited Children.

 

Paradise by Interstate 5

Invisibility, many of the runaways in Medford say, is just what they want.

By midnight, the group decided it was late enough for them to leave the pool hall and to move around the city discreetly. So they went their separate ways.

Alex Molnar, 18, took the back alleys to a 24-hour laundry to sleep under the folding tables. If people were still using the machines, he planned on locking himself in the restroom, placing a sign on the front saying “Out of Service.”

On the other side of the city, Alex Hughes, 16, took side streets to a secret clearing along Interstate 5.

On colder nights, he and Clinton Anchors have built a fire in a long shallow trench, eventually covering it with dirt to create a heated mound where they could put their blankets.

Building a lean-to with a tarp and sticks, Clinton lifted his voice above the roar of the tractor-trailers barreling by just feet away. He said they called the spot “paradise” because the police rarely checked for them there.

“Even if they do, Betty is not with us, so that’s good,” he added, explaining that she had found a friend willing to lend her couch for the night. “One less thing to worry about.”

    Recession Drives Surge in Youth Runaways, NYT, 26.10.2009,
    http://www.nytimes.com/2009/10/26/us/26runaway.html

 

 

 

 

 

Picturing the Depression

 

October 25, 2009
The New York Times
By DAVID OSHINSKY

 

DOROTHEA LANGE

A Life Beyond Limits

By Linda Gordon

Illustrated. 536 pp. W. W. Norton & Company. $35

 

Any list of the most enduring American photographs of the past century is likely to include Joe Rosenthal’s “Flag Raising on Iwo Jima”; John Filo’s image of a young woman at Kent State kneeling in anguish over the body of a mortally wounded college protester; and Richard Drew’s “Falling Man,” showing the fatal descent of a solitary figure from a high floor of the World Trade Center on 9/11. But perhaps the most iconic image — gracing textbooks, hanging from dormitory walls, affixed to political posters, even adorning a postage stamp — is Dorothea Lange’s “Migrant Mother,” taken at a California farmworkers camp in 1936. The photo shows a woman nurturing three young children, one in her arms, the others leaning on her for support. Her manner is strong and protective, yet her face shows the worry of someone overpowered by events beyond her control. She has trekked west from the ravaged Dust Bowl of Oklahoma, finding fieldwork where she can. Gazing into space, she represents the spirit of America itself in the midst of history’s worst economic disaster — the mix of courage and compassion that will lead a proud, invincible nation to endure.

“Migrant Mother” has a serendipitous history, as Linda Gordon makes clear in “Dorothea Lange,” an absorbing, exhaustively researched and highly political biography of a transformative figure in the rise of modern photojournalism. Lange had been hired by the Farm Security Administration, one of the New Deal’s more progressive agencies, to document the plight of farmworkers in the Great Depression, a mandate that covered everyone from Southern black sharecroppers to Dust Bowl refugees to Mexican-American migrants in the fields stretching from ­Texas to California. Led by Roy Stryker, a phenomenal talent spotter, the F.S.A. photography project schooled the likes of Walker Evans, Gordon Parks, Arthur Rothstein and Ben Shahn. Most came from urban backgrounds. “I didn’t know a mule from a tractor,” Lange admitted. What bound them together was their devotion to the principles of social justice represented by the New Deal.

Lange’s territory included all of California, which she covered by automobile. Driving north on Route 101 on a miserable winter’s day, she passed a hand-lettered sign reading “Pea-Pickers Camp” near the town of Nipomo. Lange drove on for 20 miles before something pulled her back. On the job for almost a year, she had come to understand the rhythms of migrant life, the periods of physically exhausting labor followed by even longer (unpaid) periods of emotionally draining inactivity. In the Nipomo camp, Lange met Florence Thompson, 32, the mother of 11 children, five born out of wedlock. The family was in desperate straits, living off stolen vegetables from the fields. Lange took a half-dozen photos, putting Thompson and her children in different poses. She took the photos from just outside their tent, even moving a pile of soiled laundry aside, so as not to embarrass the subjects by noting their squalid living conditions. (Though Gordon doesn’t mention it, Lange may have decided to use only three of the children to avoid the public perception of “Okies” as irresponsible “white trash.”) For the key photo, she “made the unusual decision to ask the two youngsters leaning on their mother to turn their faces away from the camera,” Gordon writes. “She was building the drama and impact of the photograph by forcing the viewer to focus entirely on Florence Thompson’s beauty and anxiety, and by letting the children’s bodies, rather than their faces, express their dependence on their mother.”

Gordon, who teaches history at New York University, is a leading scholar of gender and family in modern American life. (I teach part of the year at N.Y.U. but have rarely crossed paths with her.) Not surprisingly, she spends a fair amount of space on Lange’s personal life and role as a female photographer in a male-­dominated profession. Born in Hoboken, N.J., in 1895 to middle-class German-American parents, Lange faced two handicaps as a child: a severe bout with polio that left her with a permanently weakened leg and an absentee father who abandoned the family and never returned. As Gordon sees it, Lange overcame the physical handicap a lot more easily than the emotional one, though each increased her empathy for people on the margins of society. Showing little interest in school, Lange apprenticed herself to a string of portrait photographers in New York, where she learned the mechanics of the trade and the art of bonding seamlessly with her subject. “Photography was a new profession and therefore not defined as a uniquely male skill or tradition,” Gordon says. In San Francisco, where Lange moved in 1918, she created a portrait studio “successful beyond her dreams.”

She was married twice: first to the artist Maynard Dixon, who introduced her to the wonders of nature; next to Paul Schuster Taylor, an economics professor, who kindled her interest in progressive reform. Gordon expertly analyzes the political culture of Depression-era California, where the enormous power of big agriculture kept tens of thousands of landless workers in peonage and despair. She portrays Lange as an ambivalent radical, deeply sympathetic to the plight of the migrants yet uncomfortable with the chaos that social conflict inevitably produced. Early in the Depression, Lange had tried but failed to photograph the labor protests that shook San Francisco. “Much of the action was so fast-moving and so violent that slow-moving Lange could not or would not get close,” Gordon writes. “This was the territory of the new breed of adventurous photojournalists.” Lange’s talent lay elsewhere.

Gordon is more in tune with the politics of Paul Taylor, who believed in organized protest to redress economic grievances, than she is with Lange’s more passive approach. A portrait photographer at heart, Lange stressed the inner emotions of those facing injustice and deprivation. “Her documentary photography was portrait photography,” Gordon says. “What made it different was its subjects, and thereby its politics.” An individualist at heart, Lange provided an alternative to the photography of wretchedness, which centered on the misery of beaten-down victims, as well as to the Popular Front mythology, which showed earnest, well-muscled men and women laboring together in fields and factories to produce a Soviet-style paradise on earth. Lange saw America as a worthy work in progress, incomplete and capable of better. By portraying her subjects as nobler than their current conditions, she emphasized the strength and optimism of our national character. She became, in Gordon’s words, “America’s pre-eminent photographer of democracy.”

But not for long. Though Lange would go on to photograph the dehumanizing process of Japanese-American internment during World War II and produce a number of elegant spreads for Life magazine, her unique brand of photojournalism — dignified, personal, contemplative — was overwhelmed by the action of wartime photography and the more abstract avant-garde imagery to come. In some ways, Lange, who died in 1965, remains frozen in the ’30s — a relic of the Depression and the enormous creative energy it unleashed. But even a glance at “Migrant Mother” reminds us of the timelessness of her best work. “A camera is a tool for learning how to see without a camera,” she liked to say. Gordon’s elegant biography is testament to Lange’s gift for challenging her country to open its eyes.

 

David Oshinsky is the Jack S. Blanton professor of history

at the University of Texas

and a distinguished scholar in residence

at New York University.

    Picturing the Depression, NYT, 25.10.2009,
    http://www.nytimes.com/2009/10/25/books/review/Oshinsky-t.html

 

 

 

 

 

In Wisconsin,

Hopeful Signs for Factories

 

September 13, 2009
The New York Times
By PETER S. GOODMAN

 

MEQUON, Wis. — At the Rockwell Automation factory here, something encouraging happened recently that might be a portent of national economic recovery: managers reinstated a shift, hiring a dozen workers.

After months of layoffs, diminished production and anxiety about the depths of the Great Recession, the company — a bellwether because most of its customers are manufacturers themselves — saw enough new orders to justify adding people.

Given the panicked retreat that has characterized life on the American factory floor for many months, any expansion registers as a hopeful sign for the economy. Last week, the Federal Reserve found signs of “modest improvement” in manufacturing. That reinforced the direction of a widely watched manufacturing index tracked by the Institute for Supply Management, which surged into positive territory last month for the first time in a year and a half.

Yet these indications, while welcome, promise no vigorous expansion: For now, factory overseers remain uncertain that a lasting resurgence is at hand, making them reluctant to hire workers aggressively and invest in new equipment.

“We’re starting to see stabilization,” said Keith D. Nosbusch, chairman and chief executive of Rockwell, which makes machinery used in manufacturing. “The deceleration is slowing, but we haven’t seen the bottom yet. We have yet to see a turnaround.”

The tentative signs of factory improvement largely reflect a replenishing of inventories after months of weak sales, rather than an increase in demand for goods. For manufacturing to return to strength and help power a broader economic recovery, consumers would have to start buying more products, experts say.

Still, the mere process of expanding inventories could be enough to sustain several months of increased production, say economists. That could eventually generate more factory jobs, giving workers money to spend at other businesses. And that might instill enough momentum for a broader economic expansion.

“After one of the most incredible cutbacks and slicing away ever, just replenishing inventories is sufficient to maintain increased output,” said Allen Sinai, chief global economist at Decision Economics. “It’s part of the process of recovery in the United States, which is imminent.”

On Wall Street and in academic circles, where economists pick through often contradictory indicators for evidence of revival, the situation inside American factories is of crucial interest. Though manufacturing has diminished as a share of the economy, it still employs 11.7 million people, and it tends to trace the ups and downs of broader business prospects, making it a useful indicator of overall economic vigor.

The recent manufacturing data has been seized on by many economists as a signal that the recession is, technically speaking, already over or nearing an end.

“Those are genuine signs that this economy has turned the corner and begun to recover,” said Bernard Baumohl, chief global economist at the Economic Outlook Group.

However, for now, growth in manufacturing jobs is mostly just a hope. Though improved business prospects appear to have tempered layoffs, manufacturing lost 65,000 net jobs in August, according to the Labor Department, adding to more than 2 million jobs in the sector that have disappeared since the recession began.

“None of these factories are yet convinced that this is a sustainable recovery, so they’re very cautious about hiring,” said Mr. Baumohl.

Wisconsin is an ideal laboratory in which to assess manufacturing. No other state has a larger share of its jobs in manufacturing — more than 17 percent, according to the Labor Department. Today, that translates into a palpable lack of security.

At the original Miller brewery in downtown Milwaukee — now a tiny piece of a mammoth operation that produces more than 100 million cases of beer annually — roughly 25 of the 550 workers who labor for hourly wages typically leave the company in the course of a year. This year, the number is zero.

“It used to be you might leave here and go over there for a higher-paying job,” said Andrew K. Moschea, a brewing vice president for Miller Coors. “ ‘Over there’ isn’t there anymore, or it’s laying off.”

The Miller plant is a bright spot in the local economy. Though production of kegs of beer is down a little, reflecting business at restaurants and bars, lower-priced cans are up, making for expanded volume.

When Miller recently hired 30 part-time workers to round out its weekend shifts, paying more than $20 an hour, thousands applied, many from skilled trades that once paid twice as much.

Rockwell Automation’s machinery, computer software and know-how form the guts of assembly lines in a wide array of industries.

“The products they produce through the whole range are critical for doing manufacturing,” said John S. Heywood, an economist at the University of Wisconsin, Milwaukee.

In recent months, Rockwell has suffered along with much of American industry. As car sales plummeted, automakers canceled new orders for Rockwell’s machinery. As the price of oil plunged this year, energy companies scrapped expansion plans, eliminating demand for Rockwell’s machinery.

In recent years, Rockwell has established a presence in more than 80 countries, deriving roughly half its revenue overseas. But as the slowdown spread to Asia, Europe and Latin America, the comforts of being global evaporated.

As Rockwell’s customers grew fearful of losing access to credit, they eliminated plans for new factories, idled existing plants and put off replacing and servicing older gear. “It came quick,” Mr. Nosbusch said. “It was steep.”

Rockwell began large-scale layoffs in October 2008 — three percent of its 20,000-plus workers worldwide, including 300 in the United States. Scattered layoffs continued in the months after. The company also cut working hours, trimmed wages and eliminated its own contributions to employee retirement accounts.

Here in Mequon, about 20 miles north of Milwaukee, management trimmed its production work force from about 240 to 220. It scrapped a shift in its board shop, where workers in lab coats use sophisticated machinery to attach capacitors, transistors and other electronics to custom-sized circuit boards.

The circuit boards are the brains of Rockwell’s power-regulating machines. Production declined by one-fifth this year. But in recent weeks, as Rockwell has rebuilt its inventory, production has nudged up 5 percent, prompting the resurrection of the third shift.

Still, worry remains, making future hiring unlikely. Rockwell’s customers have resumed replacing older gear, but have not begun full-scale expansions, which would generate much more business.

Factory managers doubt whether American consumers — still reeling from lost jobs and savings — can snap back vigorously enough to restore manufacturing.

“I’ve got 22 years of experience and I’ve never seen anything like this,” said Mike Laszkiewicz, 48, vice president and general manager of Rockwell’s power control business. “This is a tough one. I’m a little uncertain which way this is going to go.”

    In Wisconsin, Hopeful Signs for Factories, NYT, 13.9.2009,
    http://www.nytimes.com/2009/09/13/business/economy/13manufacture.html

 

 

 

 

 

A Reluctance to Spend

May Be a Legacy of the Recession

 

August 29, 2009
The New York Times
By PETER S. GOODMAN

 

AUSTIN, Tex. — Even as evidence mounts that the Great Recession has finally released its chokehold on the American economy, experts worry that the recovery may be weak, stymied by consumers’ reluctance to spend.

Given that consumer spending has in recent years accounted for 70 percent of the nation’s economic activity, a marginal shrinking could significantly depress demand for goods and services, discouraging businesses from hiring more workers.

Millions of Americans spent years tapping credit cards, stock portfolios and once-rising home values to spend in excess of their incomes and now lack the wherewithal to carry on. Those who still have the means feel pressure to conserve, fearful about layoffs, the stock market and real estate prices.

“We’re at an inflection point with respect to the American consumer,” said Mark Zandi, chief economist at Moody’s Economy .com, who correctly forecast a dip in spending heading into the recession, and who provided data supporting sustained weakness.

“Lower-income households can’t borrow, and higher-income households no longer feel wealthy,” Mr. Zandi added. “There’s still a lot of debt out there. It throws a pall over the potential for a strong recovery. The economy is going to struggle.”

In recent weeks, spending has risen slightly because of exuberant car buying, fueled by the cash-for-clunkers program. On Friday, the Commerce Department said spending rose 0.2 percent in July from the previous month. But most economists see this activity as short-lived, pointing out that incomes did not rise. Some suggest the recession has endured so long and spread pain so broadly that it has seeped into the culture, downgrading expectations, clouding assumptions about the future and eroding the impulse to buy.

The Great Depression imbued American life with an enduring spirit of thrift. The current recession has perhaps proven wrenching enough to alter consumer tastes, putting value in vogue.

“It’s simply less fun pulling up to the stoplight in a Hummer than it used to be,” said Robert Barbera, chief economist at the research and trading firm ITG. “It’s a change in norms.”

Here in Austin, a laid-back city on the banks of the Colorado River, change is palpable.

A decade ago, Heather Nelson gained a lucrative job in telecommunications and celebrated by buying a new Ford sport utility vehicle with leather seats and an expensive stereo system. Today, Ms. Nelson, 38, again has designs on a new vehicle, but this time she plans to buy a Toyota Prius, the fuel-efficient hybrid.

In December, Ms. Nelson was laid off from her six-figure job as a patent attorney at a local software firm. Self-assured, she exudes confidence she will land another high-paying position.

But even if her spending power is restored, Ms. Nelson says her inclination to buy has been permanently diminished. Through nine months of joblessness, she has learned to forgo the impulse buys that used to provide momentary pleasure — $4 lattes at Starbucks, lip gloss, mints. She has found she can survive without the pedicures and chocolate martinis that once filled regular evenings at the spa. Before punishing heat and drought turned much of central Texas brown, she subsisted primarily on vegetables harvested from her plot at a community garden, where only one oasis of flowers remains.

Once intent on buying a home, Ms. Nelson now feels security in remaining a renter, steering clear of the shark-infested waters of the mortgage industry.

“I’m having to shift my dreams to accommodate the new realities,” she said. “Now, I have more of a bunker mentality. If you get hit hard enough, it lasts. This impact is going to last.”

For years, Americans have tapped stock portfolios and borrowed against homes to fill wardrobes with clothes, garages with cars and living rooms with furniture and electronics. But stock markets have proven volatile. Home values are sharply lower. Banks remain reluctant to lend in the aftermath of a global financial crisis.

Households must increasingly depend upon paychecks to finance spending, a reality that seems likely to curb consumption: Unemployment stands at 9.4 percent and is expected to climb higher. Working hours have been slashed even for those with jobs.

Economists subscribe to a so-called wealth effect: as households amass wealth, they tend to expand their spending over the following year, typically by 3 to 5 percent of the increase.

Between 2003 and 2007 — prime years of the housing boom — the net worth of an American household expanded to about $540,000, from about $400,000, according to an analysis of federal data by Moody’s Economy.com.

Now, the wealth effect is working in reverse: by the first three months of this year, household net worth had dropped to $421,000.

“Not only have people lost money, but they don’t expect as much appreciation in the money they have, and that should affect consumption,” said Andrew Tilton, an economist at Goldman Sachs. “This is a cultural shift going on. People will save more.”

As recently as the middle of 2007, Americans saved less than 2 percent of their income, according to the Bureau of Economic Analysis. In recent months, the rate has exceeded 4 percent.

Austin has fared better than most cities during the recession. Increased government payrolls enabled by the state’s energy wealth have largely compensated for layoffs in construction and technology. Local unemployment reached 7.1 percent in June — well below the national average. Housing prices have mostly held. Yet even people with high incomes appear reluctant to spend.

“The only time you do a lot of business is when you throw a sale,” said Pat Bennett, a salesman at a Macy’s in north Austin. “You see very little impulse buying. They come in saying, ‘I need a pair of underwear,’ and they get it and leave. You don’t really see them saying, ‘Oh, I love the way that shirt looks, and I’m just going to get it.’ ”

Mr. Bennett attributes frugality to a general uneasiness about the future.

“Our parents had the Depression,” Mr. Bennett said. “This is like a mini-shock for the baby boomers after the go-go years.”

At a mall devoted to home furnishings, many storefronts were vacant, and survivors were draped in the banners of desperation: “Inventory Clearance,” “50% Off,” “It’s All On Sale.”

But at the Natural Gardener — a lush assemblage of demonstration plots that sells seeds, plants and tools for organic gardening — business has never been better.

Sales of vegetable plants swelled fivefold in March over past years. The company added a public address system and bleachers to accommodate hordes showing up for vegetable-growing classes.

Part of the embrace of gardening stems from concerns about the environment and food safety, says the company’s president, John Dromgoole. Momentum also reflects desire to save on food costs.

“People are very interested in shoring up against losing their jobs,” he said.

    A Reluctance to Spend May Be a Legacy of the Recession, NYT, 29.8.2009,
    http://www.nytimes.com/2009/08/29/business/economy/29consumer.html

 

 

 

 

 

Recession Eases;

GDP Dip Smaller Than Expected

 

July 31, 2009
Filed at 9:30 a.m. ET
The New York Times
By THE ASSOCIATED PRESS

 

WASHINGTON (AP) -- The economy sank at a pace of just 1 percent in the second quarter of the year, a new government report shows. It was a better-than-expected showing that provided the strongest signal yet that the longest recession since World War II is finally winding down.

The dip in gross domestic product for the April-to-June period, reported by the Commerce Department on Friday, comes after the economy was in a free fall, tumbling at 6.4 percent pace in the first three months of this year. That was the sharpest downhill slide in nearly three decades.

The economy has now contracted for a record four straight quarters for the first time on records dating to 1947. That underscores the grim toll of the recession on consumers and companies.

Many economists were predicting a slightly bigger 1.5 percent annualized contraction in second-quarter GDP. It's the total value of all goods and services -- such as cars and clothes and makeup and machinery -- produced within the United States and is the best barometer of the country's economic health.

''The recession looks to have largely bottomed in the spring,'' said Joel Naroff, president of Naroff Economic Advisors. ''Businesses have made most of the adjustments they needed to make, and that will set up the economy to resume growing in the summer,'' he predicted.

Less drastic spending cuts by businesses, a resumption of spending by federal and local governments and an improved trade picture were key forces behind the better performance. Consumers, though, pulled back a bit. Rising unemployment, shrunken nest eggs and lower home values have weighed down their spending.

A key area where businesses ended up cutting more deeply in the spring was inventories. They slashed spending at a record pace of $141.1 billion. There was a silver lining to that, though: With inventories at rock-bottom, businesses may need to ramp up production to satisfy customer demand. That would give a boost to the economy in the current quarter.

The Commerce Department also reported Friday that the recession inflicted even more damage on the economy last year than the government had previously thought. In revisions that date back to the Great Depression, it now estimates that the economy grew just 0.4 percent in 2008. That's much weaker than the 1.1 percent growth the government had earlier calculated.

Also Friday, the government reported that employment compensation for U.S. workers has grown over the past 12 months by the lowest amount on record, reflecting the severe recession that has gripped the country.

Federal Reserve Chairman Ben Bernanke has said he thinks the recession will end later this year. And many analysts think the economy will start to grow again -- perhaps at around a 1.5 percent pace -- in the July-to-September quarter. That would be anemic growth by historical measures, but it would signal that the downturn has ended.

Naroff said he now thinks growth in the third quarter could turn out to be much stronger because companies will need to replenish bare-bone stockpiles of goods.

''You could get a huge swing in inventories that could create a much bigger growth rate than anybody expects,'' he said.

If that were to happen, it's possible the economy's growth could clock in around 4 percent in the current quarter, he said.

Obama's stimulus package of tax cuts and increased government spending provided some support to second-quarter economic activity. But it will have more impact through the second half of this year and will carry a bigger punch in 2010, economists said.

Even if the recession ends later this year, the job market will remain weak. Companies are expected to keep cutting payroll through the rest of this year, but analysts say monthly job losses likely will continue to narrow.

Still, unemployment -- now at a 26-year high of 9.5 percent -- will keep rising. The Fed says it will top 10 percent at the end of this year. Businesses will be unlikely to boost hiring until they're certain the recovery has staying power.

In the second quarter, businesses continued to cut all kinds of spending, but not nearly as much as they had been, one of the reasons the economy didn't contract as much.

For instance, they trimmed spending on equipment and software at a 9 percent pace in the second quarter, compared with an annualized drop of 36.4 percent in the first quarter. Similarly, they cut spending on plants, office buildings and other commercial construction at a rate of 8.9 percent, an improvement from the annualized drop of 43.6 percent in the first quarter.

Housing -- which led the country into recession -- continued to be a drag on the economy. Builders cut spending at a rate of 29.3 percent, also an improvement from the 38.2 percent annualized drop reported in the first quarter.

Consumers, meanwhile, did a slight retreat in the spring.

They sliced spending at a rate of 1.2 percent in the second quarter, after nudging up purchases at a 0.6 percent pace in the first quarter. It turns out that consumers didn't nearly have the appetite to spend in the first quarter as the government previously thought, according to revisions released Friday.

With consumers spending less on everything from cars to clothes, Americans' savings rate rose sharply -- to 5.2 percent in the second quarter, the highest since 1998.

A return to spending by governments helped economic activity in the spring. The federal government boosted spending at pace of 10.9 percent, the most since the third quarter of 2008. And state and local governments increased spending at a pace of 2.4 percent, the most since the second quarter of 2007.

An improved trade picture also added to economic activity in the spring. Although exports fell, imports fell more, narrowing the trade gap. That added 1.38 percentage points to second-quarter GDP.

The convergence of a collapse in the housing market, a near shutdown of credit and a financial crisis created what Bernanke and others have called a perfect storm for the economy. Those negative forces -- the scale of which hasn't been seen since the 1930s -- plunged the country into a recession in December 2007. It is the longest since World War II.

    Recession Eases; GDP Dip Smaller Than Expected, NYT, 31.7.2009,
    http://www.nytimes.com/aponline/2009/07/31/business/AP-US-Economy.html

 

 

 

 

 

UK slowdown sharper than feared

 

By Norma Cohen
The Financial Times
Published: April 24 2009 10:02
Last updated: April 24 2009 10:31

 

The UK economy contracted much more sharply in the first quarter of this year than economists expected, with output reduced in both services and manufacturing.

It is the fastest quarterly decline in national income since the third quarter of 1979, according to Richard McGuire, fixed income strategist at RBC Capital Markets.

Martin Wolf: Why Britain’s predicament is so bad - Apr-23UK business confidence stabilises - Apr-23GDP in the first three months of 2009 contracted by 1.9 per cent from the level seen in the fourth quarter of 2008, according to the Office for National Statistics. Economists polled by Reuters had expected an average decline of 1.5 per cent.

“The provisional UK GDP figures for Q1 suggest that the recession has so far been even deeper than previously thought.,” said Vicki Redwood, economist at Capital Economics.

“It also deals an instant blow to the chancellor’s forecast of a 3.5 per cent drop in GDP this year. For that to be achieved, GDP would have to be broadly flat from the second quarter onwards – yet the surveys are already pointing to another fall of 1 per cent or so in the second quarter,” she added.

Alistair Darling, the chancellor, predicted the biggest fall in output since the Second World War in this week’s budget but maintained the UK would return to growth of 1.5 per cent next year. His forecast was more optimistic than the consensus of private sector forecasts.

Overall, the sharpest decline was seen in the manufacturing sector, where output fell by 6.2 per cent from the previous quarter.

Separately, the Society of Motor Manufacturers and Traders underlined the depth of the downturn in the car industry. It said that UK car production more than halved in March to bring first-quarter volumes down 56.6 per cent from the year before. Commercial vehicle production fell by 63 per cent in the quarter, after a further steep fall in March.

Capital Economics noted that the biggest surprise in the GDP data was the 1.2 per cent contraction seen in the output of the services sector. In particular, the decline was sharp in business and financial services.

Mr McGuire noted that quarterly contraction in business and financial services was the sharpest since the series began in 1983.

Colin Ellis, economist at Daiwa Securities, said: “Today’s data were a sharp reminder that the UK is still a long way away from any recovery.” He noted that the weakness that shows in up the initial estimate of GDP explains the Bank of England’s monetary policy committee’s decision to pump £75bn into the economy through the banking system.

“The resulting gap between demand and potential supply is only likely to widen further over the rest of this year – which is why the MPC has opted to pump £75bn into the economy to boost demand. But we are increasingly nervous that the new money may have only a limited impact on real output,” Mr Ellis said..

However, he said there may be a silver lining in the latest data because, having contracted by 3.5 per cent in the last six months alone, there may be less of a reduction in output in the months ahead.

    UK slowdown sharper than feared, FT, 24.4.2009,
    http://www.ft.com/cms/s/0/b97c5ca0-30ad-11de-bc38-00144feabdc0.html

 

 

 

 

 

Conspicuous Consumption,

a Casualty of Recession

 

March 10, 2009
The New York Times
By SHAILA DEWAN

 

ATLANTA — It is a sign of the times when Sacha Taylor, a fixture on the charity circuit in this gala-happy city, digs out a 10-year-old dress to wear to a recent society party.

Or when Jennifer Riley, a corporate lawyer, starts patronizing restaurants that take coupons.

Or when Ethel Knox, the wife of a pediatrician, cleans out her home and her storage unit, gives away an old car to a needy friend and cancels the family Christmas. “I just feel so decadent with all the stuff I’ve got,” she explained.

In just the seven months since the stock market began to plummet, the recession has aimed its death ray not just at the credit market, the Dow and Detroit, but at the very ethos of conspicuous consumption. Even those with a regular income are reassessing their spending habits, perhaps for the long term. They are shopping their closets, downscaling their vacations and holding off on trading in their cars. If the race to have the latest fashions and gadgets was like an endless, ever-faster video game, then someone has pushed the reset button.

“I think this economy was a good way to cure my compulsive shopping habit,” Maxine Frankel, 59, a high school teacher from Skokie, Ill., said as she longingly stroked a diaphanous black shawl at a shop in the nearby Chicago suburb of Glenview. “It’s kind of funny, but I feel much more satisfied with the things money can’t buy, like the well-being of my family. I’m just not seeking happiness from material things anymore.”

To many, the adjustment feels less like a temporary, emergency response than a permanent recalibration, one they view in terms of ethics rather than expediency.

“It’s kind of like we all went overboard,” said Ms. Taylor, 33. “And we’re trying to get back to where we should have been.”

Not everyone thinks the new restraint will last. Ms. Riley, 37, who lives in Atlanta, said she doubted it would extend beyond the recession.

“I do think that maybe now it’s a little bit chic or something to save money, or to be pinching pennies,” she said.

Just as she stopped carpooling when gas prices went down, Ms. Riley said, she predicted that people would start buying again when the economy rebounded. “That’s just my own, maybe, cynical belief,” she said.

Still, economists point out that the Great Depression created a generation of cautious savers. The longer the downturn this time, they say, the more likely it is to change financial habits permanently.

Holly Moreno, 30, a part-time Web site manager in the Dallas suburb of Rowlett, Tex., whose husband is a business analyst, said she had been taking their 2-year-old son to indoor playgrounds at the mall and free story-times at the library instead of paying to get into the children’s museum, their favorite wintertime haunt.

“Even though we’re secure with our jobs, you’ve still got to plan for just-in-case,” Ms. Moreno said, “especially because we have a kid.”

As many economists have noted, cutting spending is the worst thing people with means can do for the economy right now. But that argument seems to have little traction, especially because even those with steady paychecks and no fear of losing their job have seen their net worth decline and their retirement savings evaporate.

“I don’t think there’s been any other period in modern history where appeals to people to spend the economy back into health have worked,” said Ethan S. Harris, a co-chief of United States economics research at Barclays Capital. “The only time I’ve ever seen where that kind of urging people to spend worked was after 9/11, and I did think at the time that there was some patriotic buying going on.”

After the attacks of Sept. 11, though, President George W. Bush urged Americans to go shopping. President Obama has taken a different tack, issuing a budget whose very title, “A New Era of Responsibility,” strives for an austere tone. On Inauguration Day, the first daughters, Sasha and Malia, dressed not in designer labels but clothing from J. Crew. On television, the insurance giant Allstate is running a sepia-toned “back to basics” advertising campaign, and in Target’s “new day” commercials, the “new pedicure” is administered by a spouse and the “new vacation glow” comes from a spray bottle.

“Though the recession was always talked about in economic terms, we felt really strongly that, in fact, it was a crisis of culture,” said Tracy Johnson, research director for the Context-Based Research Group, a market research firm in Baltimore that views the recession as a rite-of-passage that will reorder consumer priorities.

Ms. Johnson has advised clients to focus on quality rather than quantity. Malls redecorated in screaming red “sale” signs are not the way to go, she said, because “if you just give people the opportunity to buy more, you’re not matching up to where their minds are.”

Carol Morgan, who teaches law at the University of Georgia and whose husband has a private law practice, said she felt a responsibility to cut needless spending. “That is probably something that is a prudent thing to do in any event, but particularly now I see it as the right thing, as the moral thing to do,” she said, adding that she also hoped to increase her charitable giving. “Before, extravagance and opulence was the aspiration, and if we can replace that with a desire to live more simply — replace that with time with family, or time for spirituality — what a positive outcome to a very negative situation.”

Kim Gatlin, a novelist who lives in Park Cities, in the Dallas area, said some of her friends had urged their husbands not to give them jewelry over the holidays. “They were like, you know, ‘There’s nothing I’m dying for right now — let’s just wait,’ ” she said. “It makes them feel like they’re participating, although they don’t contribute to the income stream.”

Even some of the very affluent said they were reluctant to be conspicuous in their spending.

“It’s disrespectful to the people who don’t have much to flaunt your wealth,” said Monica Dioda Hagedorn, 40, a lawyer in Atlanta who is married to an heir of the Scotts Miracle-Gro fortune. “I have plenty of dresses to last me 10 years.”

Ms. Hagedorn said she did not hold herself apart from the rest of society because of her money. “Everyone’s going to pull through together, or everyone’s going to sink together,” she said.

Fear and uncertainty have paralyzed even the most insulated clients, said Jack Sawyer Jr., who manages money for some of Atlanta’s wealthiest families. “I have clients who have $20 million, young grandparents, and they’re concerned about whether they can continue to pay tuition for their grandchildren. It’s not a rational process.”

Any sharp decline in consumer spending will feed on itself, said Juliet B. Schor, an economist at Boston College and the author of “The Overspent American: Upscaling, Downshifting and the New Consumer” (Basic Books, 1998). Typically, people spend when those around them are spending, but in a downturn, the need to compete evaporates. “You can stay right where you are without falling behind,” Ms. Schor said.

Consumers’ focus may have shifted, she said, from striving to catch up to those above them to contemplating the fates of those below them.

Craig Robinson, 34, a manager at a real estate investment firm in Atlanta, agreed, saying that he was not tempted to join those who were scooping up deals at department stores. “There’s one guy to the right of me showing me this great deal he got on his tie,” he said, “and there’s four guys to the left of me who got laid off and can’t find a job.”

 

Karen Ann Cullotta contributed reporting from Chicago,

Gretel C. Kovach from Dallas,

and Rebecca Cathcart from Los Angeles.

    Conspicuous Consumption, a Casualty of Recession, NYT, 10.3.2009,
    http://www.nytimes.com/2009/03/10/us/10reset.html?hp

 

 

 

 

 

Economic Scene

Job Losses

Show Breadth of Recession

 

March 4, 2009
The New York Times
By DAVID LEONHARDT
 

 

What does the worst recession in a generation look like?

It is both deep and broad. Every state in the country, with the exception of a band stretching from the Dakotas down to Texas, is now shedding jobs at a rapid pace. And even that band has recently begun to suffer, because of the sharp fall in both oil and crop prices.

Unlike the last two recessions — earlier this decade and in the early 1990s — this one is causing much more job loss among the less educated than among college graduates. Those earlier recessions introduced the country to the concept of mass white-collar layoffs. The brunt of the layoffs in this recession is falling on construction workers, hotel workers, retail workers and others without a four-year degree.

The Great Recession of 2008 (and beyond) is hurting men more than women. It is hurting homeowners and investors more than renters or retirees who rely on Social Security checks. It is hurting Latinos more than any other ethnic group. A year ago, a greater share of Latinos held jobs than whites. Today, the two have switched places.

If the Great Recession, as some have called it, has a capital city, it is El Centro, Calif., due east of San Diego, in the desert of California’s Inland Valley. El Centro has the highest unemployment rate in the nation, a depressionlike 22.6 percent.

It’s an agricultural area — because of water pumped in from the Colorado River, which allows lettuce, broccoli and the like to grow — and unemployment is in double digits even in good times. But El Centro has lately been hit by the brutal combination of a drought, a housing bust and a falling peso, which cuts into the buying power of Mexicans who cross the border to shop.

Until recently, El Centro was one of those relatively cheap inland California areas where construction and home sales were booming. Today, it is pockmarked with “bank-owned” for sale signs. A wallboard factory in nearby Plaster City — its actual name — has laid off workers once kept busy by the housing boom. Even Wal-Mart has cut jobs, Sam Couchman, who runs the county’s work force development office, told me.

You often hear that recessions exact the biggest price on the most vulnerable workers. And that’s true about this recession, at least for the moment. But it isn’t the whole story. Just look at Wall Street, where a generation-long bubble seems to lose a bit more air every day.

In the long run, this Great Recession may end up afflicting the comfortable more than the afflicted.



The main reason that recessions tend to increase inequality is that lower-income workers are concentrated in boom-and-bust industries. Agriculture is the classic example. In recent years, construction has become the most important one.

By the start of this decade, the construction sector employed more men without a college education than the manufacturing sector did, Lawrence Katz, the Harvard labor economist, points out. (As recently as 1980, three times as many such men worked in manufacturing as construction.) The housing boom was like a giant jobs program for many workers who otherwise would have struggled to find decent paying work.

The housing bust has forced many of them into precisely that struggle and helps explain the recession’s outsize toll on Latinos and men. In the summer of 2005, just as the real estate market was peaking, I spent a day visiting home construction sites in Frederick, Md., something of a Washington exurb, interviewing the workers. They were almost exclusively Latino.

At the time, the national unemployment rate for Latino men was 3.6 percent. Today, when there aren’t many homes being built in Frederick or anywhere else, that unemployment rate is 11 percent. And this number understates the damage, since it excludes a considerable number of immigrants who have returned home.

Frederick was typical of the boom in another way, too. It wasn’t nearly as affluent as some closer suburbs. Now the bust is widening that gap.

If you look at the interactive map with this column, you will see the places that already had high unemployment before the recession have also had some of the largest increases. Some are victims of the housing bust, like inland California. Others are manufacturing centers, as in Michigan and North Carolina, whose long-term decline is accelerating. Rhode Island, home to both factories and Boston exurbs, has one of the highest jobless rates in the nation.

All of these trends will serve to increase inequality. Yet I still think the Great Recession will eventually end up compressing the rungs on the nation’s economic ladder. Why? For the same three fundamental reasons that the Great Depression did.

The first is the stock market crash. Clearly, it has hurt wealthy and upper middle-class families, who own the bulk of stock, more than others. In addition, thousands of high-paying Wall Street jobs — jobs that have helped the share of income flowing to the top 1 percent of earners soar in recent decades — will disappear.

Hard as it may be to believe, the crash will also help a lot of young families. The stocks that they buy in coming years are likely to appreciate far more than they would have if the Dow were still above 14,000. The same is true of future house purchases for the one in three families still renting a home.

The second reason is government policy. The Obama administration plans to raise taxes on the affluent, cut them for everyone else (so long as the government can afford it, that is) and take other steps to reduce inequality. Franklin D. Roosevelt did something similar and it had a huge effect.

Of course, these two factors both boil down to redistribution. One group is benefiting at the expense of another. Yes, many of the people on the losing end of that shift have done quite well in recent years, far better than most Americans. Still, the shift isn’t making the economic pie any bigger. It is simply being divided differently.

Which is why the third factor — education — is the most important of all. It can make the pie larger and divide it more evenly.

That was the legacy of the great surge in school enrollment during the Great Depression. Teenagers who once would have dropped out to do factory work instead stayed in high school, notes Claudia Goldin, an economist who recently wrote a history of education with Mr. Katz.

In the manufacturing-heavy mid-Atlantic states, the high school graduation rate was just above 20 percent in the late 1920s. By 1940, it was almost 60 percent. These graduates then became the skilled workers and teachers who helped build the great post-World War II American economy.

Nothing would benefit tomorrow’s economy more than a similar surge. And there is some evidence that it’s starting to happen. In El Centro, enrollment at Imperial Valley Community College jumped 11 percent this semester. Ed Gould, the college president, said he expected applications to keep rising next year.

Unfortunately, California — one of the states hit hardest by the Great Recession — is in the midst of a fiscal crisis. So Imperial Valley’s budget is being capped. Next year, Mr. Gould expects he will have to tell some students that they can’t take a full load of classes, just when they most need help.

    Job Losses Show Breadth of Recession, NYT, 4.3.3009,
    http://www.nytimes.com/2009/03/04/business/04leonhardt.html

 

 

 

 

 

Britain Is Officially in a Recession

 

January 24, 2009
The New York Times
By MATTHEW SALTMARSH

 

Britain officially entered a recession in the fourth quarter, data released Friday indicated, while other reports from Europe demonstrated the still feeble economy across region.

British gross domestic product fell 1.5 percent from the third quarter and was down 1.8 percent on a year earlier, the Office for National Statistics said in a preliminary estimate. Economists had predicted a 1.2 percent drop for the quarter.

The numbers confirmed what economists and consumers have known for some time: that the economy is in a recession.

The conventional definition of a recession is for two consecutive quarterly declines in the growth rate. The rate fell by 0.6 percent in the third quarter.

For all of 2008, growth domestic product rose 0.7 percent, the lowest rate since 1992, when it rose 0.1 percent. The increased rate of decline in output was the result of weaker services and industrial output; all sectors except agriculture contracted in the quarter.

The release is likely to add to the case for the central bank to enact unconventional measures to restore inter-bank lending and bolster consumer confidence, analysts said.

The report “adds some extra weight to the already compelling case for the Bank of England bringing rates down to near zero and shifting to unconventional policy measures with some considerable degree of alacrity,” a strategist at RBC Capital Markets in London, Richard McGuire, said.

Alistair Darling, the chancellor of the Exchequer, told Sky News after the release that the figure was “undoubtedly sharper than many people believed, partly because you’ve seen industrial production go down because the export markets have been badly affected.”

European shares fell after the report from Britain and other data from the Continent, as investors continued to worry about the heath of the financial sector. the FTSE in London was down 1.3 percent in early afternoon trading.

Prime Minister Gordon Brown of Britain announced a new bailout for the British financial system earlier in the week that increases the government’s control over lenders, saying it would offer banks insurance on troubled assets and take other measures to restore credit and support the foundering economy. The government also revised the terms of its bailout of Royal Bank of Scotland, raising its stake in the bank to 70 percent from 58 percent.

Governments in Belgium, France, Germany, Spain and the Netherlands have also announced new steps recently to bolster the capital of their lenders.

In Madrid, the government released gloomy economy data Friday. The National Statistics Institute said the jobless rate there increased to 13.9 percent from 11.3 percent in the third quarter. The number of unemployed workers in Spain rose by over 1.2 million in 2008 to end the year at 3.2 million, the highest number since the first quarter of 1998.

There was, however, a slightly more positive note from a survey of purchasing managers on euro-zone services and manufacturing activity. A composite index of both industries was at 38.5 in January from 38.2 in December, which was the lowest reading since the survey began in 1998.

Economists had forecast a decline to 37.4, according to a Bloomberg survey.

The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction.

“It’s important not to get carried away,” the Italian bank Unicredit said of the data in a research note. It added the data suggested merely that the first quarter “will probably be a bit less negative” than the fourth quarter.

It added that the recession is “bound to last at least through mid-year,” and with the headline inflation rate heading toward zero, the case for further interest rate cuts by the European Central Bank, probably in March and again in June, remains strong.

There was also a more positive note from the British retail sector on Friday. The statistics office said sales volumes between December 2007 and December 2008 grew by 1.8 percent, based on non-seasonally adjusted data.

The office noted, however, that difficulties relating to a cut value-added tax, aggressive discounting and a longer than usual trading period challenge a meaningful interpretation of the data on a seasonally adjusted basis.

Final G.D.P. figures in Britain will be released in late February.

    Britain Is Officially in a Recession, NYT, 24.1.2009,
    http://www.nytimes.com/2009/01/24/business/24euecon.html

 

 

 

 

 

In Season of Recession,

New Ways to Celebrate

 

December 26, 2008

The New York Times
By JENNIFER MEDINA

and KEN BELSON

 

No lamb this year; ham, at 89 cents a pound, was a better deal. There were gifts, yes, but fewer than usual, and only for the children. Maybe clothes this time around instead of a bag of toys. Somehow, the Long Island chill would have to be made as alluring a holiday destination as the isles of the Caribbean.

It is unsurprising, perhaps, that this is the Christmas of cutbacks, what with neighbors facing foreclosures, relatives being laid off and the endless chatter of a recession like no other. Nearly everyone in New York City, it seemed — from shoppers in central Brooklyn to churchgoers in the Bronx, people eating (and volunteering) at a Harlem soup kitchen and those heading out of town from Penn Station — had something they were doing without.

“It doesn’t feel like Christmas,” said Christine Enniss, who planned to pare her holiday spread to the essentials: green salad, roast chicken and, maybe, potato salad.

But as each family tried to make merry amid the misery, what stayed and went was revealing. Sharon Parker, whose husband recently lost his job as a mechanic, held Christmas dinner for her immediate family of five, rather than playing host to the more than a dozen cousins and friends she usually has over. Susan Strande, an art teacher who lives in the East Village, did her own baking rather than buying fancy tarts and pies. O’Neil Hutchinson, an engineering consultant, visited family in England several weeks ago to avoid the more expensive holiday fares.

Many tried to avoid sacrificing quantity by scaling back on quality. At Sherry-Lehmann Wine and Spirits on Park Avenue near 59th Street, sales of Nicolas Feuillatte Brut Champagne, at $27.95 a bottle, more than doubled, to 160 cases this month, from last December. But “all the higher-end stuff is more likely to stay on the shelves,” said Chris Adams, a partner in the store.

Mr. Adams, for his part, went to Saks Fifth Avenue on Christmas Eve to shop for a last-minute gift for his wife, as he always does. But he stayed away from the pricey perfumes, veering instead to the makeup counter to buy creams she might need and would normally pick up for herself.

Of course, this cutback Christmas can also be seen as the season of the sales. Some took advantage of bargain trips to Las Vegas resorts; others filled shopping bags with merchandise at half price. “Everything was really cheap,” said one woman, a bit defensively, as she boarded a train to see family in New Jersey, laden with Bloomingdale’s bags that were teeming with red-wrapped gifts.

For the Lombardo family, Christmas Eve has always been about the Feast of the Seven Fishes, a traditional Italian banquet.

But with business at the family’s pizzeria in Harrison, N.Y., pinched, the Lombardos scaled back. Each of the 18 adults and seven grandchildren was served the seven courses, but the grownups survived on one lobster tail instead of two. The crowd shared a few dozen clams on the half shell instead of 10 dozen or more, the shrimp cocktails were more modest, the linguini had fewer blue crabs, and there was a bit less scungilli. There were fewer Alaskan king crab legs, too.

“We’re not getting a lot of businessmen taking their clients to lunch,” Sofia Lombardo, a daughter of one of the founders, said of her family’s restaurant, Sofia’s Pizzeria. “They just have slices instead of chicken parmesan.”

The tug of tough times also led the Lombardos to trim their gift-giving. Last year, the adults traded “secret Santa” gifts worth about $75 each. This year, they decided to limit each gift to $30.

Ms. Lombardo’s parents and one of her brothers did away with swapping gifts entirely. “My family always went to the nines,” she said. “Is it weird not opening gifts on Christmas Day? Yes. But the catering business is not where it’s been in the last few years.”

Even with less, there were countless attempts to make Christmas as happy as it has always been. Parents, in particular, took pains to give their children an abundance of gifts, even while watching the price tag.

Last year, Veronica Tyms bought 30 presents for cousins, in-laws, friends and their children. This year, she chopped her list in half and fully expected the would-be recipients to do the same. “We didn’t have to talk about it,” said Ms. Tyms’s friend Margaret Gregory, who joined her this week on a bargain-hunting trip to the Target store in the Atlantic Terminal Mall in Brooklyn. “People just understood.”

Both women, however, still showered their children with presents. Ms. Gregory ticked off the list for her 18-year-old daughter: “clothes, movies, perfume, makeup.” Ms. Tyms bought gifts for her 8-year-old son and more than a dozen other children of friends and relatives.

“My son still believes in Santa Claus,” she said. “I’m not ready to change that yet.”

Ed Chin of Greenwich, Conn., who landed at job at China Merchants Bank in September after being out of work for six months, skipped the usual trip to North Carolina to visit his in-laws and to golf, and he canceled his family’s traditional Champagne brunch. Rather than expensive gifts for each of their four children, ages 9 to 14, Mr. Chin and his wife, Julie, bought an Xbox video game console for them to share.

“Even people in Greenwich have to tighten up,” Ms. Chin said of her wealthy hometown. “This is not the time to spend money on this kind of stuff.”

Dominic Giangrasso, who runs the computer systems at ConEdison Solutions, hooked up a Web camera to his flat-panel television so that his pregnant daughter, who lives in Massachusetts, could watch Christmas dinner at his home in Westchester County rather than spend money on traveling there.

The Rev. Jos Kandathikudy, the priest at St. Thomas Syro Malabar Catholic Church in the Bronx, said that last year he walked from the rectory through the neighborhood to admire the fanciful decorations. This year, he said, the streets were mostly dark.

“Businesses and residences both; I think people just want to and need to save money — everything is reduced,” he said. “But this is not the meaning of Christmas. It is not about lights and presents.”

Father Kandathikudy was one of many ministers to preach about how the tough economic times could help people focus on the religious meaning of Christmas.

One parishioner at the Church of the Ascension on West 107th Street simply handed over $500 to the Rev. John Duffell last week, saying only that someone needed it more than he did.

And at the Church of Saint Raymond on Castle Hill Avenue in the Bronx, one altar girl had trimmed her wish list.

“My daughter understood that things were difficult this year,” said Maria Gonzalez, 40, as she walked into the noon Mass at the church, beaming as her daughter, Jessica Garcia, led the processional. “She loves music and has worked so hard to practice, so all she wanted was a keyboard. She wants to play music to serve God, and I want to help her in that.”
 


Ralph Blumenthal and Kareem Fahim contributed reporting.

    In Season of Recession, New Ways to Celebrate, NYT, 26.12.2008,
    http://www.nytimes.com/2008/12/26/nyregion/26xmas.html

 

 

 

 

 

Officials Vow to Act

Amid Signs of Long Recession

 

December 2, 2008
The New York Times
By EDMUND L. ANDREWS

 

WASHINGTON — The United States economy officially sank into a recession last December, which means that the downturn is already longer than the average for all recessions since World War II, according to the committee of economists responsible for dating the nation’s business cycles.

In declaring that the economy has been in a downturn for almost 12 months, the National Bureau of Economic Research confirmed what many Americans had already been feeling in their bones.

But private forecasters warned that this downturn was likely to set a new postwar record for length and likely to be more painful than any recession since 1980 and 1981.

“We will rewrite the record book on length for this recession,” said Allen Sinai, president of Decision Economics in Lexington, Mass. “It’s still arguable whether it will set a new record on depth. I hope not, but we don’t know.”

As if adding a grim punctuation mark to what could become the worst holiday shopping season in decades, the Dow Jones industrial average plunged nearly 680 points, or 7.7 percent, to 8,149.09.

Part of the drop may have reflected profit-taking after last week’s surge in stock prices, but it also came in response to new data showing that manufacturing activity dropped to its lowest point in 26 years.

Both the chairman of the Federal Reserve, Ben S. Bernanke, and the Treasury secretary, Henry M. Paulson Jr., vowed to use all the tools at their disposal to restore a measure of normalcy to the economy.

Mr. Bernanke, speaking to business leaders in Austin, Tex., said it was “certainly feasible” to reduce the Fed’s benchmark overnight lending rate below its current target of 1 percent, signaling that the central bank would lower the rate at its next policy meeting in two weeks.

And in an unusually explicit follow-up, Mr. Bernanke said the central bank was also prepared to use the “second arrow in our quiver” if policy makers have already reduced that rate, called the federal funds rate, to nearly zero.

Among the options, he said, the Fed can start aggressively buying up longer-term Treasury securities. That would have the effect of driving down longer-term interest rates. The Fed is already doing something of that sort, by buying up commercial debt from private companies as well as mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

Investors reacted to Mr. Bernanke’s remarks by pouring money into longer-term Treasury bonds, which briefly pushed already-low yields on 10-year and 30-year Treasuries to new record lows. Investors appeared to be reacting mainly to the clear signal from Mr. Bernanke that the Fed was preparing to pump money into the economy by buying up longer-term bonds.

The yield on 30-year Treasuries declined 0.23 percentage points, to 3.21 percent, and briefly touched a record low of 3.18 percent. The yield on 10-year Treasuries fell 0.19 percentage points, to 2.73 percent.

In normal times, those kinds of yields would automatically mean lower interest rates on mortgages, automobile loans and other forms of consumer debt. But the credit markets have been stalled by continued fears among financial institutions about who can be trusted for even short-term transactions, so the effects on home loans and other purposes could remain modest.

Mr. Paulson, in a speech in Washington on Monday, vowed to look at new ways to use the $700 billion bailout fund that Congress approved in October.

In Congress, Democratic leaders are drawing up a huge new fiscal stimulus plan that could total more than $500 billion. Democrats said they planned to have the measure ready as soon as Congress convened with a strengthened Democratic majority in January. Meanwhile, Democrats could take up legislation next week that would provide financial assistance to the automobile industry.

President Bush, increasingly the odd man out in the last weeks of his term, said his administration would do whatever was necessary to safeguard the system.

“I’m sorry it’s happening, of course,” Mr. Bush said in an interview with ABC’s “World News” on Monday. “Obviously, I don’t like the idea of Americans losing their jobs or being worried about their 401(k)s. On the other hand, the American people got to know that we will safeguard the system.”

But many analysts said they saw no signs yet that the economy was nearing a bottom. American consumers, who for decades have been the country’s tireless source of growth when all else failed, have cut back on their spending more sharply than at any time since the early 1980s.

Consumer spending plunged in the third quarter of this year, and the evidence so far suggests they may pull back even more in the fourth quarter. Consumers account for about 71 percent of American economic activity, and their most recent retreat is occurring even though gasoline prices have dropped by almost half in the last month and left people with more money in their pockets.

In officially declaring that the current recession began in December 2007, the National Bureau of Economic Research paid little heed to the fact that the nation’s gross domestic product actually expanded slightly in the first and second quarters of 2008.

In explaining its decision, the bureau noted that a wide variety of other indicators, including payroll employment and personal income, peaked in December 2007. Payroll employment has dropped every month since then. Personal income declined and then zigzagged until June, and has declined steadily since then.

The gross domestic product often fluctuates widely from quarter to quarter, but it also received a somewhat artificial boost from the tax rebate checks that the government mailed out last spring and early summer as a temporary stimulus.

Ed McKelvey, an economist at Goldman Sachs, said the bureau’s starting point of last December for the recession was close to Goldman’s own estimates.

The announcement means that the downturn is already one year old. That is longer than the average length of 10.5 months for recessions since World War II. The current record for the longest recession over the last half-century is 16 months, which was reached in both the downturns of 1973-74 and 1980-81.

Mr. Sinai of Decision Economics said it was hard to imagine that this downturn would have hit bottom within the next four months, which would make it all but certain to set a new record.

Mr. Paulson, who teamed up with the Fed last week to begin a new $200 billion program to buy up consumer debt and small-business loans, said he had committed all but about $20 billion of the first $350 billion Congress authorized for the bailout fund.

“We are actively engaged in developing additional programs to strengthen our financial system so that lending flows to our economy,” Mr. Paulson said in his speech. “We are continuing to examine potential foreclosure mitigation ideas that may be an appropriate” use of the funds.

Democratic lawmakers have sharply criticized Mr. Paulson for refusing to use any of the money yet for reducing foreclosures. Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corporation, warned last month that as many as 4.5 million people were likely to lose their homes through foreclosure. Ms. Bair proposed a plan that she said could prevent about one-third of those foreclosures.

    Officials Vow to Act Amid Signs of Long Recession, NYT, 2.12.2008,
    http://www.nytimes.com/2008/12/02/business/economy/02econ.html

 

 

 

 

 

Recession is official,

economists say

 

1 December 2008
USA Today
By Barbara Hagenbaugh

 

WASHINGTON — It's official: The USA is in a recession that started in December 2007.

The committee of economists responsible for determining the dates of business cycles said Monday that they met by conference call on Friday, Nov. 28 and "the committee determined that a peak in economic activity occurred in the U.S. economy in December 2007.

" The peak marks the end of the expansion that began in November 2001 and the beginning of a recession."

December 2007 is the last month in which U.S. employers added jobs. Since then, businesses have shed workers.

The responsibility for defining U.S. recessions falls to economists who are members of the Business Cycle Dating Committee at the private, non-profit National Bureay of Economic Ressearch in Cambridge, Mass. The organization has been dating business cycles since 1929 and first formed the all-volunteer committee 30 years ago.

While recessions are often described as two consecutive quarters of decline in economic output, that's not the official definition.

Instead, the panel looks at a multitude of economic data, including gross domestic product, income, employment, industrial production and retail sales. The economy contracted in the July-September quarter at the fastest pace in seven years.

Panel members include Robert Hall of Stanford University, Martin Feldstein and Jeffrey Frankel of Harvard University, Robert Gordon of Northwestern University, James Poterba of MIT, David Romer of the University of California, Berkeley, and Victor Zarnowitz of the Conference Board.

Private economists months ago shifted their focus from whether the economy was in a recession to how long the downturn will last and how deep the slump will be.

As bad news on the economy continues to pour in, those forecasts become more dire.

Monday, the Institute for Supply Management said its gauge of manufacturing activity fell in November to the lowest level in 26 years as measures of orders, production and jobs all fell.

The private group said its index fell to 36.2 last month, from 38.9 in October and 50 a year earlier. November's number was the lowest since May 1982, when the economy was in one of the longest post-World War II recessions.

A reading below 50 indicates contraction in the manufacturing sector; readings above 50 indicatge expansion. The gauge has been below 50 for four months.

"It's going to take a few months for most of these things to find a bottom," says Norbert Ore, who chairs the ISM manufacturing committee.

President Bush, expressing remorse that the global financial crisis has cost jobs and damaged retirement accounts, told ABC's "World News" in an interview that he will support additional federal intervention, if necessary, to ease the recession. The interview will air Monday night.

 

Contributing: Associated Press

    Recession is official, economists say, UT, 1.12.2008,
    http://www.usatoday.com/money/economy/2008-12-01-recession-official_N.htm

 

 

 

 

 

Economy shrinks

as Britain enters recession

 

October 25, 2008
From The Times
Gary Duncan, Economics Editor

 

Britain’s economy is shrinking for the first time in 16 years, official figures showed yesterday, confirming that the country is in recession.

The toll from the credit crisis and housing crash has ended Britain’s longest unbroken run of growth since quarterly records began in 1955. City analysts gave a warning that the economy could shrink at an even faster pace in coming months.

Figures for gross domestic product revealed a worse-than-expected fall of 0.5 per cent over the past three months. A recession is defined as two consecutive quarters of negative growth, but a further contraction is inevitable.

The response on the financial markets was swift and brutal. The pound plummeted against the dollar and nearly £49 billion was wiped off the value of Britain’s leading companies. Alistair Darling, the Chancellor, sought to shore up confidence among fearful families and businesses. “It’s obvious now that our economy, other economies across the world, are moving into recession,” he said. “Yes, it’s going to be difficult, yes it’s going to be tough, but we can get through it.”

Charlie Bean, the deputy governor of the Bank of England, said that Britain was only “in the early days” of the fallout from unprecedented global financial convulsions. “This is a once-in-a-lifetime crisis, and possibly the largest crisis of its kind in human history,” Professor Bean said.

Shares in London slumped in response. The FTSE 100 closed down a further 204.5 points, or 5 per cent.The pound suffered one of its worst batterings since it was floated in 1971. At one point it was down by 8 cents against the dollar, before closing a little over 3.5 cents down on the day at $1.5837. In Europe, leading shares also fell by 5 per cent, while US blue-chips fell almost 4 per cent in a day of wild swings in financial markets.

Currencies and commodity prices also suffered. Oil prices continued to fall despite a decision by Opec to cut production by 1.5 million barrels a day. Benchmark Brent crude fell $3.94 to $61.98 per barrel – from a high of $146 in July.

Even gold, the traditional safe haven in times of panic, fell sharply, although it later rcovered. Pressure is growing on the Bank to deliver drastic cuts in interest rates. Its rate-setting committee is expected to order a half-point cut at the start of next month.

    Economy shrinks as Britain enters recession, Ts, 25.10.2008,
    http://business.timesonline.co.uk/tol/business/economics/article5010581.ece

 

 

 

 

 

Financial crisis

Pound falls to five-year low

as Bank head admits

recession is here

• Sterling drops 4% against the US dollar
• King says banking turmoil 'almost unimaginable'
• FTSE 100 drops 2% in early trading

 

Wednesday October 22 2008
10.15 BST
Guardian.co.uk
Graeme Wearden and Ashley Seager
This article was first published on guardian.co.uk on Wednesday October 22 2008.
It was last updated at 10.18 on October 22 2008.

 

Sterling was hammered down to a five-year low against the dollar this morning after Mervyn King admitted for the first time that the UK is entering a recession.

The pound began tumbling last night as the Bank of England governor told business leaders in Leeds that the economy is shrinking and hinted at fresh interest rate cuts.

By this morning it had fallen by seven cents to $1.6209, a drop of more than 4%. Traders reported frantic selling as investors rushed to cut their losses by selling the UK currency.

Sterling also fell against the euro, losing around 2% to a low of €1.2636 this morning. The euro itself fell sharply against other currencies, hitting a four-and-a-half-year low against the yen, and its lowest value against the dollar since November 2006.

Shares fell sharply in London this morning, with the FTSE 100 shedding over 100 points, or 2.3%, in early trading to 4127.29.

The pound had already been hit yesterday by unexpectedly gloomy manufacturing data showing that confidence has collapsed, and King's comments appear to have added to concern over quite how weak the British economy now is.

Describing the banking system turmoil of recent weeks as "extraordinary, almost unimaginable," he said the financial system had come closer to collapse two weeks ago than at any time in the past 90 years.

"The combination of a squeeze on real take-home pay and a decline in the availability of credit poses the risk of a sharp and prolonged slowdown in domestic demand. Indeed, it now seems likely that the UK economy is entering a recession," King said.

"It is surely probable that the drama of the banking crisis, which is unprecedented in the lifetime of almost all of us, will damage business and consumer confidence more generally."

His fears were confirmed yesterday as the CBI reported that confidence among British manufacturers had tumbled to its lowest since July 1980, with output and orders also collapsing.

The thinktank the National Institute for Economic and Social Research said today that Britain entered a recession in the third quarter of the year and warns the slump will probably last for a year or more, making it every bit as painful as the recessions of the early 1990s or early 1980s.

City commentator David Buik said that King's speech has "put sterling to the sword for the time being".

The Bank of England cut the cost of borrowing by half a point to 4.5% earlier this month, as part of coordinated global action, and King hinted that rates may come down again soon.

"During the past month, the balance of risks to inflation in the medium-term shifted decisively to the downside," he said.

CMC Markets analyst James Hughes said that the possibility of interest rate cuts across Europe have made the greenback more attractive - after months in which traders bet against the dollar.

"Investors continue to flock to the dollar as speculation mounts that central banks elsewhere will continue with aggressive rate cuts in an attempt to stimulate growth in the near term," said Hughes.

Official data out on Friday will almost certainly show that the economy contracted in the July to September period, having not grown at all in the second quarter. A "technical" recession is defined as two consecutive quarters of contraction, which experts say is the least Britain can expect this time round.

    Pound falls to five-year low as Bank head admits recession is here, G, 22.10.2008,
    http://www.guardian.co.uk/business/2008/oct/22/pound-recession-interest-rates

 

 

 

 

 

Dodging another Great Depression

 

Sun Nov 2, 2008
3:02pm EST
Reuters
By Emily Kaiser

 

WASHINGTON (Reuters) - Starbucks is starting to sell more coffee. Companies are once again finding buyers for their short-term debt. Money is beginning to flow back into emerging markets.

Maybe this is not the second Great Depression after all.

While there is no doubt the global economy is hurting -- perhaps sliding into the worst recession since the 1970s -- investors seem to be concluding that comparisons to the dark days of the 1930s are a bit overdone.

A news database search turned up 16,095 articles that included the phrase "Great Depression" in the past three months, nearly triple the number of times it appeared in the previous three months.

But there are promising signs central banks are gaining some traction with their efforts to stabilize financial markets and reopen the lending taps, and the panic-selling that gripped stock markets for much of October seems to be abating.

Since October 7, the day before major central banks announced coordinated interest rate cuts, the rates banks charge each other for overnight lending have fallen dramatically.

On October 7, the London interbank offered rates for U.S. dollars jumped to nearly 4 percent. As of Friday, it was down to 0.4 percent. Libor is the benchmark used to set borrowing costs on trillions of dollars worth of lending worldwide.

"It's certainly moving in the right direction," Jay Bryson, global economist with Wachovia, said on a conference call as he discussed the bank's economic outlook. Bryson expects a global recession, probably deeper than the most recent one in 2001.

"Our underlying assumption is that the steps that the governments around the world have taken to date, and potentially ones that haven't been announced yet ... will ease the global credit crunch. There could be hiccups along the way but you won't see a complete lock-down in credit markets."



PERKING UP

On Thursday, both the European Central Bank and the Bank of England hold interest rate-setting meetings, and both are expected to reduce short-term borrowing costs. The U.S. Federal Reserve, Bank of Japan and People's Bank of China all lowered interest rates last week.

With the rate cuts, government steps to shore up banks and guarantee loans, and programs to get hard currency into emerging markets, credit is starting to flow again.

Issuance of commercial paper, a form of debt that companies use to finance day-to-day business, grew last week after six consecutive weeks of declines. To be sure, that was largely because the Federal Reserve launched a new program to buy the paper, and private investors have yet to show much enthusiasm.

The U.S. central bank and the International Monetary Fund also opened up new lending channels last week to get dollars and other hard currencies into key emerging economies. That helped to lift stock markets in countries such as Brazil.

There were also some reassuring comments from the corporate world. Starbucks Corp (SBUX.O: Quote, Profile, Research, Stock Buzz) said sales at its established stores edged up in October, and it was hopeful that it had weathered the worst of the slowdown.



UGLY PRICED IN?

As of Friday, nearly two-thirds of the companies in the U.S. Standard and Poor's 500 index had reported quarterly earnings, and 60 percent of them posted results that were better than analysts expected, according to Thomson Reuters data. Of course, earnings were down 11.7 percent on average.

The message from those companies was that the U.S. economy is tilting into a recession that some CEOs say will be the worst since the 1970s. But they do not expect catastrophic job losses and bank failures on a par with the Depression era.

"For the time being, investors appear to be more focused -- and cheerful -- over the slate of global policy announcements and the ensuing impact of breaking the logjam in the money and credit markets than on the continuous set of very weak incoming economic data, not just here but abroad," said Merrill Lynch economist David Rosenberg.

"Either a deep and prolonged recession has already long been discounted, or financial market participants are going to be in for a very big surprise because the economic data, as ugly as they are, are likely to get a lot uglier in coming months and quarters," he said.

The next unpleasant surprises may come this week. Euro-zone retail sales for September are expected to show a decline, and the global manufacturing sector probably contracted last month. U.S. retailers are expected to report weak sales for October, and the U.S. October employment report may show job losses nearing the 200,000 mark.

As depressing as those figures may sound, they are consistent with a recession, not a depression. The commonly cited rule of thumb for determining when a garden variety recession becomes something much worse is a 10 percent drop in GDP. Not even bearish economists are predicting that.



(Editing by Dan Grebler)

    Dodging another Great Depression, R, 2.11.2008,
    http://www.reuters.com/article/ousiv/idUSTRE4A128R20081102

 

 

 

 

 

U.S. Trade Deficit

Grows Unexpectedly

 

April 10, 2008

The New York Times

By MICHAEL M. GRYNBAUM

 

The gap between what Americans import and export unexpectedly widened in February as domestic demand appeared to increase for automobiles and capital goods.

The trade deficit grew 5.7 percent, to $62.3 billion, its highest reading since November and the second consecutive month of increases. The estimate for January was revised up to $59 billion from $58.2 billion, the Commerce Department said on Thursday.

The increase came as a surprise to economists who had expected the economic downturn to suppress domestic demand for foreign goods. Instead, import sales jumped 3.1 percent, the biggest gain in almost a year, to $213.7 billion from $206.4 billion in January.

Americans bought up more foreign motor vehicles, clothing, household appliances and industrial equipment.

The appetite for foreign goods even outpaced the first decline in oil imports in nearly a year. Foreign petroleum sales fell in February, though the figure will probably climb back in March, when the price of crude oil reached to a record high.

“The trend in import growth is slowing as domestic demand softens and we fully expect a sharp correction next month,” wrote Ian Shepherdson, a London-based economist at the forecasting firm High Frequency Economics.

Sales of exports increased 2 percent to $151.4 billion from $148.2 billion in January. Foreign demand for motor vehicles, agricultural products and heavy machinery all increased.

Export sales, which have advanced over the last year, were likely to bolster again as the dollar fell to new lows against other world currencies.

Thursday’s report may not bode well for the economy as a whole. With consumer spending on the home front falling, many economists — including those at the Federal Reserve — have said that demand from foreign customers has propped up the ailing American economy, keeping many businesses afloat even as the housing slump and a weakening job market dampen domestic demand.

If imports outpace exports, that means more money may be moving out of American businesses than coming in. But economists said the deficit would probably narrow in coming months.

“We expect a reversal of the numbers soon as households continue grappling with falling home prices, plunging payrolls and financial market turmoil,” wrote Dimitry Fleming, an economist at ING Bank, in a note to clients.

    U.S. Trade Deficit Grows Unexpectedly, NYT, 10.4.2008,
    http://www.nytimes.com/2008/04/10/business/worldbusiness/10cnd-trade.html

 

 

 

 

 

Greenspan says U.S.

"on the edge" of recession

 

Thu Feb 14, 2008

10:08pm EST

Reuters

By Anna Driver

and Eileen O'Grady

 

HOUSTON (Reuters) - Former U.S. Federal Reserve Chairman Alan Greenspan on Thursday said the U.S. economy is "clearly on the edge" of a recession.

Greenspan said the economy will continue to erode until there is a stabilization of U.S. housing prices.

"We have a long way to go" before housing prices hit a bottom, Greenspan told energy executives at the CERA conference.

High oil prices are dragging on the economy, but the fact that they haven't done more damage shows its resiliency.

"It's a burden now," Greenspan said. He added that it's "quite remarkable" that the U.S. economy is "able to do reasonably well" with oil prices near historic highs.

Crude oil futures hit above $95 a barrel on Thursday and went above $100 in early January.

Greenspan again -- as he had last month -- said that the likelihood of the U.S. economy going into recession was "50 percent or better."

He said the U.S. economy was growing at "stall speed."

"Stagflation is too strong a term for what we are on the edge of," Greenspan said.

The subprime mortgage crisis would already have put the United States into recession if U.S. businesses weren't healthy in part as the result of years of low interest rates, Greenspan said.

"If businesses weren't in extraordinarily good shape, I have no doubt we wouldn't be asking if we're in a recession, but how long and how deep," Greenspan said.

"Obviously, they (businesses) are not pushed for credit," said Greenspan.

Banks have cut back lending and will continue tight controls on borrowing until housing prices backed by subprime mortgages stabilize, said Greenspan.

Greenspan made his comments in response to questions by Daniel Yergin, chairman of CERA.

Greenspan said he would like to see additional use of electric cars.

Nuclear power makes the "most sense" to increase U.S. power generation when all trade-offs are weighed, he said. "We have to use nuclear," Greenspan said.

He said more discussion is needed before any "cap" is created as part of a U.S. cap-and-trade carbon program.

A carbon cap would likely lead to lower economic activity and higher unemployment if one were set before emissions-cutting technology is widespread, Greenspan said.

Greenspan said he doubted that technological advances will solve the problem of growing carbon dioxide emissions.

"If you don't have a significant amount to trade, a lot of people won't be able to trade and won't have the energy they need," Greenspan said.

Stagflation is a period when economic growth is stagnant but when prices rise. Recession is at least two quarters of negative economic growth.
 


(Additional reporting by Erwin Seba in Houston;

writing by Bernie Woodall; Editing by Gary Hill)

Greenspan says U.S. "on the edge" of recession,
R, 14.2.2008,
http://www.reuters.com/article/newsOne/idUSN1450696720080215

 

 

 

 

 

 

 

 

 

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