The domestic unemployment picture is growing worse, with jobless numbers growing, writes Associated Press reporter Christopher S. Rugaber.
The employment picture is looking bleaker as applications for jobless benefits rose last week to the highest level in almost six months.
It’s a sign that hiring is weak and employers are still cutting their staffs.
First-time claims for jobless benefits edged up by 2,000 to a seasonally adjusted 484,000, the Labor Department said Thursday. Analysts had expected a drop. That’s the highest total since February.
Initial claims have now risen in three of the last four weeks and are close to their high point for the year of 490,000, reached in late January. The four-week average, which smooths volatility, soared by 14,250 to 473,500, also the highest since late February.
Analysts said that the unexpected rise in claims suggests hiring in August won’t be much better than July. The economy added a net 12,000 jobs last month after excluding the loss of temporary census positions.
The jobless claims report “represents a very adverse turn in the labor market, threatening income growth and consumer spending,” Pierre Ellis, an economist at Decision Economics, wrote in a note to clients.
The prospect of more layoffs added to this week’s grim outlook for the economy, which began Tuesday when the Federal Reserve lowered its assessment of the recovery.
Without new jobs, count on a double dip
That’s the verdict from Yale economist Robert Shiller, reports Cynthia Lin of MarketWatch.
The U.S. economy has a “significant likelihood” of entering a double-dip recession if the government doesn’t step in to help the unemployed, economist Robert Shiller told MarketWatch News Break on Wednesday.
The Yale University professor and author of the best-selling book “Irrational Exuberance” pinned the probability of a double-dip recession at more than a 50-50.
Shiller pointed to the nation’s stubbornly-high unemployment as a root cause of lingering economic woes. And with the Federal Reserve running out of bullets to fight a second recession, he urged Congress to join the battle and focus on putting people back to work.
“Beyond the Fed, I’d like to see the government take a renewed stimulus package focused on creating jobs [and] on activities that involve a lot of people,” Shiller said.
Mortgage delinquency rates continue to soar
David Streitfield of the New York Times reports:
During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.
The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.
Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.
The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.
“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer here, where the problem is especially pronounced. “Their chances are pretty good of walking away and not having the bank collect.”
Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.
Is deflation more likely than inflation?
If the concerns of economists surveyed by the Wall Street Journal are any clue, put your money on deflation.
Reporter Phil Isso has the story:
A Wall Street Journal survey found that by a two-to-one margin Wall Street economists see deflation as a bigger threat to the U.S. economy over the next three years than inflation.
“Deflation is dangerously close,” said David Resler
of Nomura Securities, one of 53 economists surveyed by the Wall Street Journal. Among economists who answered the question, nearly two-thirds said that deflation poses the bigger risk to the economy over the next three years; the remainder said inflation is the bigger threat. That compares to an April survey, when the economists were split 50/50 over whether inflation or disinflation posed the bigger risk over the next year.
The survey, conducted earlier this week ahead of today’s meeting of Federal Reserve officials, found that half of the economists expect the Fed to keep its target for short-term interest rates unchanged at least until the middle of 2011. A month earlier, the survey found 70% of the respondents expected the Fed to begin raising rates before June 2011. The Fed has been holding its target for short-term interest rates close to zero since December 2008.
“High unemployment, subpar growth and benign inflation with deflationary risk prolong the zero rate,” said Allen Sinai of Decision Economics.
Indeed, economic conditions have shifted the debate from when the central bank will raise rates to whether the Fed should employ more stimulative methods aimed at boosting growth.
Subsidized housing openings lead to mob scene
Another sign of the desperation sweeping the nation’s growing numbers of poor happened this week in Atlanta, where the opening of new subsidized housing units lead to a new riot with score injured.
Atlanta Journal-Constitution reporters Craig Schneider and Tammy Joyner
got the story:
Thirty thousand people turned out in East Point on Wednesday seeking applications for government-subsidized housing, and their confusion and frustration, combined with the summer heat, led to a chaotic mob scene that left 62 people injured.
At the Tri-Cities Plaza Shopping Center, emergency vehicles passed each other, transporting 20 people to hospitals. Medical and police command posts were set up on scene. East Point police wore riot gear. Officers from four other agencies supported them. Yet no arrests were made.
All of this resulted from people attempting to obtain Section 8 housing applications and, against long odds, later securing vouchers for affordable residences. Some waited in line for two days for the applications.
Offering applications for the first time since 2002, East Point Housing Authority officials had triple the crowd they anticipated, and one that was three-fourths of the 40,000 population of the south Fulton city. Things got out of hand when people started cutting into lines and authorities attempted to move groups to different areas.
Homeowner default notices on the rise
From Dave Gonigam at The Daily Reckoning:
325,229 US properties got a notice of default, auction, or repossession last month – down 10% from the previous year, but up 4% from the previous month.
92,858 properties were repossessed – up both month-to-month and year-to-year, indeed setting the second-highest total since RealtyTrac started keeping numbers in early 2005. So banks are working through their foreclosure backlog before sending out a truckload of new notices.
The numbers will “get a lot worse unless we see some job creation,” says RealtyTrac’s Rick Sharga, pointing out the obvious.
With friends like these. . .
Joshua Green’s op ed at the Boston Globe reports on a legislative Phyrric victory, where the hungry were sacrificed to preserve the jobs of public workers.
On Tuesday, President Obama signed a $26 billion bill to help state and local governments cover Medicaid payments and avoid having to lay off teachers and other public employees. In what passes for high drama in Washington, the House of Representatives was called back from its summer recess to vote on the package, and the successful outcome was hailed as a major Democratic victory. “We can’t stand by and do nothing while pink slips are given to the men and women who educate our children or keep our communities safe,’’ Obama said. “That doesn’t make sense.’’
No, it doesn’t. But only by the occluded standards of contemporary Washington could this aid package be considered a victory. What began three months ago as a $50 billion emergency spending bill limped to the president’s desk at half that size and was largely paid for — “offset’’ in the clinical terminology of the budget — by cutting $12 billion from the food stamp program. In other words, a measure designed to help one group struggling in the recession came at the expense of another that is even worse off — and growing rapidly.
The number of people receiving food stamps stands at a record 41 million, or one out of every eight Americans. Driven by the downturn, that number has risen every month for the past 18 months. Last year alone, it grew by 20 percent. It’s grown by 50 percent since the recession began.
Food stamp recipients are often demeaningly cast as being akin to welfare queens — indolents on the public dole. But contrary to stereotype, half of those who depend on food stamps are children, and many more are elderly or disabled. The benefits are hardly generous: an average recipient household receives $133 a month, or $4 a day. And recipients are anything but indolent. Nearly half of households with children that receive food stamps are ones in which a parent is employed, a number that has grown steadily over the past two decades as real wages have fallen. As Obama himself took to pointing out in the presidential campaign, his own family required food stamps when he was a child.
Hunger, soaring food prices follow Pakistan floods
Pakistanis grappled with skyrocketing fruit and vegetable prices Sunday caused by floods that have destroyed more than 1 million acres (405,000 hectares) of crops and left at least 4 million people in need of food assistance in the coming months.
The rising prices threaten to amplify misery in a country where many residents were already struggling with poverty and food insecurity before the worst flooding in Pakistan’s history struck about two weeks ago, killing 1,500 people and leaving millions more begging for help.
The prices of basic items such as tomatoes, onions, potatoes and squash have in some cases quadrupled in recent days, putting them out of reach for many Pakistanis who struggled to get by even before the floods hit.
”It is like a fire erupted in the market,” said Mohammad Siddiq as he purchased vegetables in the city of Lahore. ”Floods and rains have made these things unaffordable.”
Regulators also described a reliance on “rote calculations” and routines.