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Teachers Now Getting The Pink Slips

The myth of the recession-proof job continues to be exposed. Police officers, firefighters— now teachers.

From the Wall Street Journal’s Alex Frangos today:

In a sign of how severe the employment downturn is getting, even schoolteachers, an occupation once viewed as recession proof, are feeling the pain.

Education jobs grew steadily in recent years amid rising enrollment and government efforts to reduce class sizes. Now the increase in teaching positions has leveled off as school districts struggle with budget pressures. The demographic bulge caused by children of baby boomers — the so-called echo boom — has also begun to wane.

Los Angeles Unified School District laid off 2,500 teachers this spring. Broward County, Fla., Ms. Frommer’s district, cut 400 school jobs. Rochester, N.Y., laid off 300 teachers.

Other districts have avoided cuts by negotiating pay reductions and enacting furloughs and hiring freezes. In June, education jobs actually ticked up 0.5% nationally to just under 3.1 million on a seasonally adjusted basis. But the number of education-related jobs has declined in six of the past 12 months, according to the Bureau of Labor Statistics.

That contrasts with annual growth of about 3% over the past 15 years in the education field. In the past year, education jobs have grown at about half that rate. Most in demand are teachers in math, science and special education. College instructors have also been in high demand.

Many of the layoffs came in June as teachers prepared to say goodbye to their students for summer. Union and state rules require schools to give teachers notice before the end of the school year if their jobs won’t be there in the fall.

Frangos added that younger instructors have been the ones getting most of the pink slips:

Because contracts often require that those with the least seniority be laid off first, the brunt of lost jobs has been borne by younger teachers.

Think the news of school layoffs are deterring young adults from trying to enter the teaching field? Think again. Frangos noted:

Despite headlines about teacher layoffs, more young people are going back to school to obtain their teaching certificates.

I wish aspiring teachers the best of luck, as it sounds like they’ll need it.

Source:

“Even ‘Recession Proof’ Schoolteachers Feel Pinch of Employment Downturn”
Alex Frangos
Wall Street Journal, July 3, 2009

U.S. Housing Price Forecast: Double-Digit Percentage Decline Still Ahead

“Housing rebound still fragile; St. Louis sales down 16% from May ‘08”

-St. Louis Post-Dispatch, June 23, 2009

“Option ARMs reset threatens housing rebound”

-Seattle Times, June 27, 2009

“Housing rebound continues, barely”

CNN Money.com, July 1, 2009

From headlines like these, I apparently slept through the U.S. housing bottom. Then again, maybe not. From Reuters today:

U.S. housing prices will fall by a double-digit percentage from already beaten-down levels, resulting in an overall 40 percent plunge by the time foreclosures peak in the second half of 2010, Barclays Capital economist Michelle Meyer said.

Meyer issued her forecast two days after the Standard & Poor’s/Case-Shiller Home Price Indexes showed for April an 18.1 percent year-to-year decline, compared with 18.7 percent in March, in the rate of home price declines in 20 major U.S. metropolitan areas.

The indexes have tracked the prices of U.S. single-family homes since 1987.

“While the early signs of improvement are in place for housing, the market will likely remain out of balance for some time, given the flood of foreclosures,” Meyer wrote.

“Home prices are likely to continue to fall, albeit at a slowing pace, even after the economy technically emerges from the recession.” Home prices have fallen 32.6 percent from their peak three years ago, S&P/Case-Shiller said.

On that basis, they would need to fall another 11 percent for an overall 40 percent peak-to-trough decline. Further declines could imperil metropolitan areas that have yet to experience the worst of the nation’s housing slump.

According to S&P/Case-Shiller, New York was the only major market to have above-average, month-over-month housing price declines in both March and April and also have a below-average decline for the year ended in April.

Home prices in that market fell 12.5 percent from a year earlier. The Denver area had the smallest drop, 4.9 percent.

Bloomberg’s Oshrat Carmiel talked more about the Manhattan residential real estate market today. Carmiel wrote:

Manhattan apartment prices dropped for the first time since 2002 in the second quarter as the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos. caught up to property owners in the nation’s most expensive urban market.

The median price fell 18.5 percent from a year earlier to $835,700, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today. The number of sales plunged by half, the most since Miller Samuel began keeping data in 1989.

“The standstill that existed after Lehman Brothers has been broken, and it was the sellers that cried uncle,” Pamela Liebman, chief executive officer of New York-based property broker the Corcoran Group, said in an interview.

Values are falling broadly in Manhattan for the first time in the almost four-year U.S. housing recession, with declines now seen in co-operatives and condominiums of every size and price. Private-sector employment in the city dropped by 91,200 jobs, or 2.8 percent, in the 12 months through May as Wall Street losses and asset writedowns topped $1.4 trillion.

The price of studio apartments declined 16 percent from a year ago to a median of $405,000, according to Miller Samuel. One-bedrooms dropped 17 percent to $650,000 and two-bedrooms fell 23 percent to $1.27 million. Three-bedroom units fell 37 percent to $2.35 million and four-bedrooms plummeted 47 percent to a median of $3.92 million.

Wake me when the housing bottom arrives, please.

Sources:

“US Home Prices Seen Falling 40% Overall: Analyst”
Reuters, July 2, 2009

“Manhattan Apartment Prices Drop as Lehman Hits Home (Update1)”
Oshrat Carmiel
Bloomberg, July 2, 2009

Luck Be A Lady In This Labor Market?

Back on May 22, I wrote the following:

America’s labor force has been hit hard by this recession. Especially the guys. From Reuters’ Ed Stoddard earlier in the week:

One statistic that stands out in America’s recession-stung economy is the unemployment rate for adult men: in April for the second month in a row it surged ahead of the national average to 9.4 percent versus 8.9 percent for all workers. The jobless rate for adult women was 7.1 percent.

The latest numbers don’t show much improvement in the unemployment rate gap between men and women. From MarketWatch’s Andrea Coombes today:

The current recession is hitting workers in just about every industry, but men are taking a much bigger hit than women.

The 2.3 percentage-point gap between men’s June unemployment rate of 10.6% and women’s 8.3% rate is near the highest it’s ever been since records started being kept in 1948. The gap first hit 2 percentage points in March this year and the 2.5 percentage-point gap in May was the highest ever.

The overall unemployment rate rose to 9.5% in June, from 9.4% in May. The economy lost a higher-than-expected 467,000 jobs in June.

“The gap between female and male unemployment has never been as large as it is now,” said Sophia Koropeckyj, an economist with Moody’s Economy.com.

It’s not hard to see why. Two male-dominated industries — construction and manufacturing — account for about half of the some 6 million jobs lost since the recession started in December 2007 and both industries started shedding jobs before that.

“Every industry is contracting, but these industries have taken the brunt,” Koropeckyj said. Given that men account for 87% of workers in manufacturing and 71% in construction, it’s not surprising that men’s unemployment rate is rocketing past women’s rate.

The only two private-sector industries to show a net increase in jobs from the start of the recession through May are health care and education — and women workers are highly concentrated in both.

Health care logged a net gain of about 542,000 jobs from December 2007 through May, and private education showed a net gain of about 102,000 jobs in that period.

Eighty-one percent of health-care workers are women, and 61% of workers in private education are women, Koropeckyj said. Also, government has shown a net job gain of 259,000 in that period, and 57% of government workers are women.

Frank Sinatra, “Luck Be A Lady” (1966)
YouTube Video Link

Source:

“Recession hits men harder”
Andrea Coombes
MarketWatch, July 2, 2009

Several States Face Midnight Budget Deadline

Talk about coming down to the wire. Reuters’ Jim Christie wrote this evening about how several states are trying to approve budgets for the new fiscal year— before midnight tonight. Christie said:

California prepared on Tuesday to resort to issuing IOUs as the giant but cash-strapped U.S. state struggled to approve a new budget in time for the new fiscal year that begins on Wednesday.

The IOUs, which are notes promising payment to vendors and local agencies, or shutting down some public services, are among measures that California and other states may have to rely on as they contend with staggering budget gaps caused by the U.S. recession.

Several U.S. states are due to start their fiscal years on July 1 with budget talks at an impasse. California, the most populous state, is especially hard hit.

The Golden State, hit by a leap in unemployment and a crash in property values, is suffering its worst tax revenue fall since the Great Depression and faces a $24.3 billion budget deficit.

“It’s been a sort of perfect storm, of a very deep recession hitting us and exposing the weakness of depending on revenue sources sensitive to economic cycles,” labor lobbyist Barry Broad said.

Fixing the massive budget gap “is going to require pain. That’s the only way out of it,” added Jack Pitney, a professor of government at Claremont McKenna College.

California Governor Arnold Schwarzenegger insists on deep spending cuts. But Democrats who run the Legislature want tax increases that Schwarzenegger and fellow Republicans oppose.

Lili Ladaga of Yahoo! News also talked about California’s woes this afternoon, and wrote:

If the political wrangling over the budget isn’t resolved by midnight tonight, Californians will be feeling the pain on every level, big and small. Just a few of the proposed spending cuts:

— State employees will be forced to take another day of unpaid leave a month, in addition to the two days leave they were forced to take starting in December. (NYT)

— Funding for the Bureau of Narcotics Enforcement will be slashed by $20 million. The “little-known unit” has played a key role in several of the state’s high-profile cases: The bureau’s agents helped arrest Scott Petersen for the murder of his wife and unborn child, and their investigation led to charges in Anna Nicole Smith’s overdose death. (AP)

— 80 percent of state parks would be closed, 25 in the Bay Area alone, including several beaches along the peninsula. Park visitors spend an estimated $2.6 billion a year in and near state parks, but closing the parks would save only .26 percent of the $24 billion deficit. (SF Chronicle)

— Education funding would be reduced by $5.3 billion. School districts have already laid off 30,000 employees. Class sizes are expected to surge from 20 to 30 students and many after school programs, arts and music classes will be cut. A national education survey conducted this year ranked California 47th in per-student spending. (AP)

— Gov. Schwarzenegger is proposing to eliminate the state’s $1.3 billion welfare program. Frank Mecca, the head of the County Welfare Directors Association of California, tells Time, “California could become the only state in the First World without subsistence benefits for poor children.”

Christie also talked about how other states are dealing with their budget deadlines. He wrote:

As California officials readied their IOUs, Ohio Governor Ted Strickland on Tuesday signed a seven-day interim spending plan that buys lawmakers more time to craft a two-year budget.

“It is troubling that Senate Republicans are still refusing to say what they would do to fill the budget gap. Because of this, I have no other option but to sign a temporary budget that only delays the inevitable hard choices before us,” Strickland, a Democrat, said in a statement.

Meanwhile, Indiana appeared to be on course to avert a government shutdown at midnight. A vote on a compromise budget was heading for a vote on Tuesday, according to John Schorg, a spokesman for Democrats who control the House.

Republican Governor Mitch Daniels has said safety services, such as state police and prisons, will continue to operate should there be a shutdown, while other services would stop.

Illinois lawmakers could send Governor Pat Quinn legislation to sell $2.23 billion of shorter-term general obligation bonds to ease spending cuts in a budget they passed late last month. Proceeds from the bonds would fund part of a fiscal 2010 pension payment, freeing up money in the budget.

But Quinn, who has claimed the Legislature’s budget has a $9.2 billion shortfall, appeared to be holding out for a balanced spending plan to avoid drastic cuts in social services spending. He has been pushing for an income tax increase.

Pennsylvania’s lawmakers were stuck on Governor Edward Rendell’s plan to raise the income tax rate, possibly pushing negotiations past the midnight deadline.

Sources:

“Cash-strapped states up against budget deadlines”
Jim Christie
Reuters, June 30, 2009

“California on the brink”
Lili Ladaga
Yahoo! News, June 30, 2009

Survivalists No Longer On The Fringe

Some time ago, I learned about a work of fiction that dealt with survival during a full-scale socioeconomic collapse… in America. Intrigued, I picked up James Wesley, Rawles’ Patriots: A Novel of Survival in the Coming Collapse last weekend. Some of you may have already heard of Rawles, who is also the editor of SurvivalBlog.com, the Internet’s most popular blog on family preparedness. I’m still working on the book (about to begin Chapter 20), but if asked what I thought about it so far, I would say “frightening.” So much so, that the day after I began reading the book, I sat around thinking to myself, if the kind of scenario which Rawles conjures up ever materializes, we are screwed. With a capital S. What scenario is that, you might ask? From the back cover:

America faces a full-scale socioeconomic collapse in the near future. The stock market plummets, hyperinflation cripples commerce and the mounting crisis passes the tipping point. Practically overnight, the fragile chains of supply and high-technology infrastructure fall, and wholesale rioting and looting grip every major city.

Not much of a stretch, considering the “progress” we’ve already made in bringing about something like this.

Even though the book is scary, it’s also gripping, hard to put down, and incredibly-detailed, especially when it comes to survival equipment and techniques.

Speaking of survivalists, I came across a piece by the Arizona Republic’s Ryan Randazzo that you might find interesting (hat tip Michael Panzner at When Giants Fall). Randazzo wrote Tuesday:

As the recession lingers, some Phoenix-area residents are shifting attention from their financial troubles, including falling home values and shrinking retirement savings, to stockpiling food and ammo.

They worry the economic turmoil could lead to skyrocketing inflation, food scarcity, even violence. To prepare, they are forming social-networking groups to discuss how to store grains, purify water, plant gardens and, if needed, shoot guns.

“Most of us feel that if things do get better, it will be a long way out,” said Jeff Rodriguez, a 26-year-old software engineer from Glendale. “I want to have some preparations in place.”

The economy has him thinking a lot more about things like where his food comes from, how much cheap oil is left in the world and how people in the blazing-hot Valley would survive a major economic failure.

He has carefully prepared a 12-row, 384-square-foot garden, stores a ton and a half of grain in his home, and is considering buying pygmy goats or chickens.

He also has researched solar electricity and a rainwater-collection system.

He is far from alone. Rodriguez belongs to a local network of like-minded people who include retirees, young mothers and successful professionals.

These people are joining thousands nationwide who are studying survival tactics far from the backwoods bunkers associated with “survivalists.”

At least two survival-related groups have formed in since December, and groups with varying outlooks and politics have sprouted nationally from Kentucky to New York.

Of course, it’s not unheard of for mainstream groups to prepare for emergencies. The Mormon Church, which reports 13.5 million members worldwide, has long counseled self-sufficiency and encourages families to keep a prudent supply of food on hand.

Disasters such as hurricanes and 9/11, and even perceived troubles like the Y2K bug, always increase interest in survivalism. The men behind the counters at U.S. Surplus Corp. in Phoenix see a crush of new customers every time tragedy strikes.

The newbies stand out from the military personnel and outdoor enthusiasts who stop in for rugged clothing, rations or canteens.

“They are the ones trying to fix up a cave to live in,” store manager Gary Pickering said. “They are asking a lot of questions and buying things they normally wouldn’t, like water purification tablets.”

Sales at the store haven’t slid with the rest of the economy, officials said. Preparing for a disaster makes sense only if people actually know how to use the equipment they are buying, said Cody Lundin, who runs a survival-skills school in Prescott and authored two books on the subject.

He says people should learn to care for themselves in case of emergency whether a disaster is pending or the economy is tanking.

Last year was among the best ever for his school, although it’s not always clear what motivates people to sign up.

“I’m seeing an influx of people simply calling to inquire what I think about stuff,” Lundin said. “They are probing the waters because they are getting freaked out.”

Professional counselor Rita Archambault said her East Valley clinic is treating more people with anxiety over the economy.

“I have not seen so much concern about the economy in my entire life,” she said.

If planting a garden, raising poultry or stockpiling ammunition makes people feel better about their situation, good for them, she said.

“If you are not hurting anybody and you are reducing your anxiety, what harm is there?” Archambault said.

The only danger is if people get so obsessed that they neglect their job or family, she said.

It’s not surprising that many of the people preparing for tough times are educated professionals, said Heidi Wayment, a social-psychology professor at Northern Arizona University who has researched disasters and anxiety.

“To understand the huge potential crisis that could come from economic collapse, you have to be educated,” Wayment said. “I wouldn’t say these people are crazy – far from it.”

Source:

“Survivalism grows popular in Valley”
Ryan Randazzo
Arizona Republic, June 23, 2009

Related Post

From our sister blog Investorazzi.com this morning:

“Warren Buffett Warns Of Problems With Inflation, Dollar”

“What we’re doing raises the profitability significantly of very significant inflation down the road. Not this year, next year, maybe the year after, but we have taken actions, and they were appropriate actions, to fight the war we were in that started with a vengeance last September. In taking those actions, we’ve applied medicine dosages to a patient that’s never been done before except in wartime. And it will have consequences. And nobody knows exactly what they will be and nobody knows how effective we will be draining a system that we’ve been flooding. But the probability of significant inflation has really gone up.”

Foreign Investors Growing Tired Of American Assets?

The month of April saw waning demand for American assets by overseas investors. From Bloomberg’s Vincent Del Giudice this morning:

International purchases of American financial assets grew more slowly in April as China, Japan and Russia pared demand for Treasuries, underscoring the danger of U.S. reliance on foreigners to finance its fiscal deficit.

Total net purchases of long-term equities, notes and bonds rose a net $11.2 billion, compared with buying of $55.4 billion in March, the Treasury said today in Washington. International holdings of Treasuries increased a net $41.9 billion, compared with the $55.3 billion gain in March. Including bills, the holdings fell a net $2.6 billion…

Including short-term securities such as stock swaps, foreigners sold a net $53.2 billion of U.S. financial assets, compared with net buying of $25 billion the previous month…

Foreign investments in U.S. agency debt slumped for the eighth time in 10 months, by $2.5 billion in April. Net purchases of American equities slowed to $4.6 billion in April from $13.2 billion the prior month. Holdings of corporate bonds tumbled a net $9.7 billion, the biggest decline since November.

China, the largest holder of U.S. Treasury securities, cut back their holdings to $763.5 billion in April from $767.9 billion in March. Japan, the second largest holder of Treasuries, reduced theirs to $685.9 billion from $686.7 billion a month earlier. China’s holdings of Treasuries represent about 10% of America’s publicly-held debt.

Bloomberg’s Del Giudice noted:

Waning demand for Treasuries may exacerbate a jump in yields that threatens to make it harder for the U.S. to pull out of its deepest recession in at least half a century. Yields on benchmark 10-year notes have climbed more than 1 percentage point since mid-March, contributing to an increase in mortgage rates that’s counteracting Fed efforts to aid the housing market.

Source:

“International Demand for U.S. Assets Slowed in April (Update3)”
Vincent Del Giudice
Bloomberg, June 15, 2009

IMF Chief Warns ‘Worst Is Not Yet Behind Us’

The head of the International Monetary Fund still sees rough seas ahead for the global economy. From MarketWatch today:

World leaders need to be cautious in attempting to roll back economic stimulus measures because the worst of the global recession isn’t over, International Monetary Fund Managing Director Dominique Strauss-Kahn said Monday in Kazakhstan, according to Reuters. The Group of Eight finance ministers, who met Saturday in Italy, said in a joint statement they would ponder unwinding stimulus measures amid signs of stabilization in the economy, but offered no timetable. The G8’s stance “is that we are beginning to see some green shoots but nevertheless we have to be cautious,” Strauss-Kahn said. “The large part of the worst is not yet behind us.”

Source:

“Worst not over, IMF chief warns: report”
MarketWatch, June 15, 2009

Investigation Reveals U.S. Banks Getting Weaker

I give up.

I’ve spent the last 10 minutes on Google looking for a recent headline from any publication pronouncing the U.S. banking system healthy so that I might use it as an intro to this post.

I didn’t find any.

The banking industry, as a whole, was worse off at the end of last quarter than it was three months prior, according to MSNBC investigative reporter Bill Dedman. He wrote on their website Thursday:

Bad loans on real estate continue to push harder on the nation’s banks.

At the end of the first quarter, six out of every 10 banks in the U.S. were less well prepared to withstand their potential loan losses than they had been at the end of 2008, according to a new analysis by msnbc.com and the Investigative Reporting Workshop at American University in Washington. Overall, bad loans rose another 22 percent in the quarter as the recession continued.

Msnbc.com is publishing information on the nation’s 400 largest banks as well as all banks with high ratios of troubled loans to assets. Information on the financial health of more than 8,000 banks nationwide is available at the updated BankTracker site published by the American University group.

The analysis relies on information reported through March 31 to the Federal Deposit Insurance Corp., calculating each bank’s troubled asset ratio, which compares troubled loans against the bank’s capital and loan loss reserves. A similar ratio, known as a Texas Ratio, is commonly used by bank analysts as a snapshot of a bank’s financial health, though it can’t capture all the nuances of a bank’s condition.

Although much attention has been focused on surprising profits at U.S. banks in the first quarter of 2009, under the surface lurks an industry still suffering from the recession. If you set aside the 10 largest banks, the rest of the industry lost money in the quarter, primarily because of very large losses at a few banks.

While the 10 largest banks reported $10.2 billion in earnings for the quarter, the remaining 8,245 banks together lost $2.6 billion, according to the analysis.

One in five banks lost money in the quarter, and several lost big, weighing down the rest.

Four large banks account for more than $5 billion in losses. Huntington National Bank of Columbus, Ohio, lost $2.46 billion. FIA Card Services of Wilmington, Del., lost $1.47 billion. SunTrust Bank of Atlanta lost $783 million. Sovereign Bank of Wyomissing, Pa., lost $764 million.

Source:

“Most banks still weakening, analysis shows”
Bill Dedman
MSNBC, June 11, 2009

Personal Wealth Declines By $1.3 Trillion In First Quarter

In case you hadn’t already heard…

From Associated Press economics writer Jeannine Aversa yesterday:

The brute force of the recession earlier this year turned back the clock on Americans’ personal wealth to 2004 and wiped out a staggering $1.3 trillion as home values shrank and investments withered.

Net worth, or the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards, declined 2.6 percent in the first three months of the year, the Federal Reserve said Thursday…

While the first quarter was ugly, the hit to Americans’ net worth was worse late last year. In the October-December period, it fell a record 8.6 percent, according to revised figures. That was the largest drop on record dating to 1951.

If Americans continue to spend — no guarantee — Fed Chairman Ben Bernanke and other economists say they think the recession will end late this year. But if shoppers hunker down and cut spending again, that could delay any recovery. Late last year, Americans cut spending at the fastest rate in 28 years.

Some economists believe thrift may be the norm for a while. Aversa added:

Even if things improve, such a dramatic evaporation of wealth will probably make Americans more thrifty down the road, said Scott Hoyt, senior director of consumer economics at Moody’s Economy.com.

“The bulk of consumers alive today have not experienced declines in wealth like this,” Hoyt said. “They are already turning thrifty, and it will stay that way beyond the short term. This has been a significant learning experience.”

Should this be the case, it would not bode well for the U.S. economy, where it is suggested consumer spending accounts for 70% of the nation’s economic activity.

Source:

“1st quarter wiped out $1.3 trillion for Americans”
Jeannine Aversa
Associated Press, June 11, 2009

1 In 9 Americans Now On Food Stamps

The number of Americans turning to food stamps keeps on rising. From Reuters’ Charles Abbott earlier today:

One in nine Americans are using federal food stamps to help buy groceries as the country’s deep recession forced another 591,000 people onto the federal anti-hunger program at latest count.

Enrollment jumped 2 percent to 33.2 million people in March, the fourth consecutive month that rolls hit a record, said the Agriculture Department. The average monthly benefit was $113.87 per person.

“It’s tough out there for struggling families and will be for many months to come,” Jim Weill, president of the Food Research and Action Center, said.

“It’s very likely that the numbers will continue to grow in the coming months as a turnaround in unemployment and wage declines typically lags behind the recovery of the broader economy,” he said.

In 20 states, as many as one in eight are on the food stamp program, according to the Food Research Center.

A 2004 Cornell University study found that at least half of all Americans between the ages of 20 and 65 resort to using food stamps at least once during their adult lives. The study, published in the December 2004 issue of the Journal of Nutrition Education and Behavior, also found links with race and education. More than 85% of African Americans will use food stamps some time between the ages of 20 and 65, compared with 37% of white Americans, while about 64% of adults with less than 12 years of education will use food stamps, compared with 38% of adults with 12 or more years of education.

Sources:

“One in nine Americans on food stamps, USDA says”
Charles Abbott
Reuters, June 3, 2009

“Half of all Americans will use food stamps during adulthood, Cornell researcher’s study finds”
Cornell News, August 24, 2004

Recession Blues? Bring Out The Blondes

Think the following might be an option the White House is considering in their efforts to jump-start the economy? From the Telegraph (UK) this past Sunday:

Several hundred blonde women marched through the Latvian capital Riga yesterday in a bid to cheer up the crisis-hit Baltic nation, suffering the worst recession of all 27 EU member states.

Led by an orchestra, the first-ever blonde parade featured women dressed in pink and white, some accompanied by lapdogs, in a charity fund-raising event that organisers hope will become an annual event.

“I’m not stupid. I’m beautiful and I’ll prove it,” Ilona Zigure, a participant, said. Organisers said they were determined to bring positive energy to their country, expected to see its economy contract by 16 per cent this year.

The parade was part of a “Blonde Weekend” which also featured a blonde golf tournament, a little lady fashion show, an evening ball, and a children’s drawing competition.

“It’s a great time to spend in the parade and contribute to a charity,” said Ieva, one blonde spectator.

“Finally something different, something positive because I’m tired of hearing about the crisis,” said another, 70-year-old Ausma.

The event attracted many locals and puzzled tourists…

And conceived many fantasies, I’m sure.

Source:

“Blondes march in Latvia ‘to cheer-up nation’”
Telegraph (UK) , May 31, 2009

Nouriel Roubini Warns Of ‘Perfect Storm’ In 2010

There once was a time when former Clinton administration Treasury Department director Nouriel Roubini was seen as a “madman” by the global financial community for his predictions of an economic tsunami. The New York Times’ Stephem Mihm wrote back on August 15, 2008:

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.” People laughed — and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a “permabear.” When the economist Anirvan Banerji delivered his response to Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.

“Dr. Doom,” as he is sometimes called by the media, turned out to be correct in his assertions.

Fast forward to May 28, 2009. Reuters’ Marie-France Han wrote:

Nouriel Roubini, the famously glum economist who predicted the financial crisis, said that while the recession in the United States may well be over at the end of the year, another dip was still possible next year.

“I still expect that economic growth in the U.S. is going to be negative through Q4, and that we’ll see positive growth in Q1,” Roubini told Reuters in an interview on the sidelines of the Seoul Digital Forum.

“The U.S. recession is going to be U-shaped, lasting roughly 24 months,” he added.

“Compared to the current consensus that says we are practically at the end of the recession … my view is: no, it’s going to last another six to nine months before it’s over.”

According to Han, the chairman of Roubini Global Economics LLC also warned of the potential for a “perfect storm” down the road. From the piece:

Roubini stood by a recent article in which he mentioned the possibility of a “perfect storm” in 2010.

“There is even a risk of a double dip, a W-shaped recession at the end of next year,” he said, a combination of rising oil prices, rising public debt and increases in real interest rates, rising concerns about inflation and the expiration of a number of tax cuts in the United States.

Last week, Dr. Roubini talked about this “perfect storm” in a piece he wrote for Forbes. From their website on May 21:

We cannot rule out a double-dip W-shaped recession, with the wings of a tentative recovery of growth in 2010 at risk of being clipped toward the end of that year or in 2011. This will result from a perfect storm of rising oil prices, rising taxes and rising nominal and real interest rates on the public debt of many advanced economies, as concerns rise about medium-term fiscal sustainability and the risk that monetization of fiscal deficits will lead to inflationary pressures after two years of deflationary pressures.

I think I’ll have that stiff drink now…

Sources:

“Dr. Doom”
Stephem Mihm
New York Times, August 15, 2008

“Roubini says U.S. economy may dip again next year”
Marie-France Han
Reuters, May 28, 2009

“Don’t Believe The Optimists”
Nouriel Roubini
Forbes, May 21, 2009

Boom2Bust Turns Two Years Old

Memorial Day Weekend 2007. Sure seems like yesterday….

Friday, May 25, 2007.

The Dow Jones Industrial Average closed out the week at 13,507.28. The S&P 500 index finished up at 1,515.73.

The median house price is $222,700, according to the National Association of Realtors.

Family net worth is at an all-time high of $64.36 trillion for the quarter.

The number of unemployed persons is 6.8 million and the unemployment rate is 4.5 percent.

Total public debt outstanding in the United States is $8.8 trillion.

Talk of the “Goldilocks economy” rules the day, and Washington and Wall Street are in “don’t worry, be happy” mode.

Federal Reserve chairman Ben Bernanke doesn’t believe the nation will slip into a recession, and he rejects the notion raised by his predecessor, Alan Greenspan, that the economy’s expansion could be in danger of fizzling out…

The Fed chief testified on Capitol Hill amid growing concerns that problems with risky mortgages and a painful housing slump could send the economy into a tailspin. Greenspan recently said there’s a one-in-three possibility of a recession this year.

But Bernanke — while acknowledging there are risks — told Congress’s Joint Economic Committee that the Fed does not see such negative forces pushing the economy into a recession.

“I would make a point, I think, which is important, which is there seems to be a sense that expansions die of old age, that after they reach a certain point, then they naturally begin to end,” Bernanke said. “I don’t think the evidence really supports that. If we look at history, we see that the periods of expansions have varied considerably. Some have been quite long.”

-Associated Press, March 29, 2007

…a new SUV in every McMansion’s garage

Fast forward to today…

The Dow Jones Industrial Average closed at 8,473.49. The S&P 500 index finished up at 910.33.

The median house price in the first quarter of 2009 is now $169,000, according to the National Association of Realtors.

Banks and businesses worldwide have lost $1.47 trillion in write-downs and credit losses in the past 22 months stemming from the collapse of the subprime-mortgage market.

Household net worth dropped a record 9 percent in the fourth quarter of 2008, pushing total net worth down to $51.48 trillion. It was the sixth straight quarterly decline from the peak of $64.4 trillion in the second quarter of 2007. Also, the drop in net worth in the fourth quarter of 2008 was the largest drop in dollar terms on record, going back to 1951, when the U.S. government began keeping quarterly records. The 9 percent drop was also the largest drop as a percentage change on record.

In April (the last month data is available for), the number of unemployed Americans reached 13.7 million persons and the unemployment rate was 8.9 percent. According to the Bureau of Labor Statistics, 5.7 million jobs have been lost since the recession began in December 2007.

The total public debt outstanding in the United States is now $11.3 trillion. Furthermore, as Bloomberg’s Mark Pittman and Bob Ivry pointed out on March 31:

The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.

New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.

Goldilocks made a fine meal for the bears.

But I’m convinced our fuzzy friends still want more.

Thank you all for reading and contributing comments to Boom2Bust.com, and for inspiring me to post about some of the financial research I come across on a daily basis.

Personally, I think that while we may get out of this recession soon enough, I fear all the additional obligations accrued since 2007 will only have made the house of cards that is the U.S. financial system weaker, thereby setting ourselves up for more pain when the eventual crash comes.

You can only kick the can down the road for so long before you have to call it a day.

Year three, here we come!

Christopher E. Hill
Editor