African Americans earn less than their parents
Orlando Patterson takes a look at the impact of the Neocon economy and finds it hasn’t benefitted African Americans. Writing at The Nation [via Alternet], he finds:
The twentieth-century economic adage that when America sneezes the rest of the world catches pneumonia has a tragic domestic counterpart in the relative economic condition of African-Americans. What for white Americans is a Great Recession amounts to a virtual depression for a substantial number of African-Americans. Unemployment rates stood at 15.5 percent in May, compared with the overall national rate of 9.7 percent. For black men the situation is almost as desperate as during the nadir of the Great Depression of the 1930s: more than one in six is unemployed, compared with the national average of 9.8 percent; among black teenagers, many of whom are out of school and seeking full employment, the rate stands at a shocking 38 percent.
The unemployment figures reflect only part of a broader pattern of socioeconomic disparity between blacks and whites; nearly all indexes — income, wealth, educational attainment, homeownership and foreclosures — show growing gaps and a retreat from gains made in the 1990s, gaps that are being devastatingly widened by the Great Recession. Black median household income, for example, the lowest of major US ethnic groups, has declined by 7.8 percent from its high point of $37,093 in 2000, when it was 65 percent of white median household income. At $34,218 in 2008, it stood at 61.6 percent of white household income. Even more troubling has been the stunning growth in disparity between white and black wealth. A report by the Institute on Assets and Social Policy shows that black median family wealth hardly grew over the past quarter-century, standing at $5,000 in 2007; it is now probably much lower, in view of the disproportionate impact of the housing crisis on black homeowners. In contrast, white median family wealth in 2007 was $100,000, twenty times that of black families and a fourfold increase in disparity over this relatively short period.
But perhaps the most startling recent development has been the finding of several recent reports showing that the black middle class as a group is not only losing ground compared with other groups but is failing to reproduce itself. A 2007 Pew Foundation/Brookings Institution study found that a majority of black middle-class children earned less than their parents and, even more alarming, that almost half of downwardly mobile offspring had fallen to the bottom of the income distribution.
But the richest are doing just fine, thank you
Those with the most are doing quite well, writes Adrianne Appel for Inter-Press Service.
Times are tough for workers in the U.S. where a recession has a stranglehold on much of the economy, but life is perfectly rosy for those at the top.
The riches of the wealthiest North Americans grew by double digits in 2009, primarily from interest their money earned when it was invested in the stock market and elsewhere, according to a report by the Boston Consulting Group.
Millionaires in the U.S. and Canada saw their wealth increase 15 percent in 2009, to a total of 4.6 trillion dollars, the report found.
Worldwide, 11 million – or less than 1 percent of all households – were millionaires in 2009. They owned about 38 percent of the world’s wealth or 111 trillion dollars, up from about 36 percent in 2008, according to Boston Consulting Group.
About 4.7 million millionaires live in the U.S., four percent of the population and more than anywhere else in the world. Japan, China, Britain and Germany followed the U.S. in the number of millionaires.
Their fortune is a stark contrast to the lives of more than 15 million people in the U.S. who are unemployed and searching for work, and the eight million more who are just getting by with a part-time job, according to the U.S. Bureau of Labor Statistics.
And the rich get even richer by walking away
While most folks in the middle class feel shame when they’re forced to walk away from their homes because of job loss, pay cuts, and other money woes, it doesn’t seem to bother the rich who walk away from their homes.
To them it’s just abandoning one bad investment as they head out to grab
something more profitable.
David Streitfeld covered the story for the New York Times:
More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.
Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.
“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist. [Emphasis added — esnl.]
South Korea’s housing bubble bursts
The nation that built an industrial revolution of its own is now seeing its housing market collapse, writes Kim Tong-hyung of Korea Times.
As the housing market skids through its most dramatic plunge in years, observers can’t agree on whether the country is in for a spectacular crash or a moderate bounce-back.
However, one thing appears to be certain: the days of splurging on houses as an investment, which led to the borrowing binge that fueled the bubble in the past decade, is all but over.
Those who had been convinced just a while ago that they were sitting on a fortune are now distressed about losing one.
“Home buyers considered themselves more as investors than consumers in the past, but we have come to a time when taking on mortgages worth many times your salary is downright stupid,’‘ said Lim Sang-soo, a researcher at the Hyundai Research Institute.
“To put it simply, people will be choosing and buying houses they want to live in, rather than looking to flip the properties for profit down the road. It’s hard to imagine the house-price booms of the mid-2000s happening again and these certainly aren’t comforting times for those who took on massive loans to buy houses to bank their financial future on.’‘
House prices in Seoul dipped 1.07 percent during the first six months of the year compared to the second-half of 2009, declining for 19th straight weeks and counting, with the falls sharper in previously hot districts such as Songpa, Dobong, Gangbuk and Nowon.
According to the Ministry of Land, Transport and Maritime Affairs, home sales in Seoul numbered 2,263 units in May, just about one-third of the monthly average of 6,800 units posted over the past four years.
The Korea Housing Institute predicts that house prices in Seoul will drop another 2.8 percent during the second-half of the year and a 3.1 percent decline for neighboring urban cities.
Oversupply is an increasing concern as the inventory of unsold homes continues to grow and scores of new homes, which had been planned during the housing market’s pre-crisis peak between 2006 and 2008, are to be completed in the coming months.
U.S. new home sales drop 30 percent in May
Michael White at The Implode-o-Meter says it’s a vitally important story that’s been ignored by the mainstream media
The Index of pending home sales fell a record 30% in May to a record-low reading of 77.6 — two huge pessimistic indicators of future prices nationwide. Yet the combination of two record negatives went barely reported when the stats were announced last week.
So here’s the news for you now, a week late, but new to the marketplace of ideas. Pending-home sales now stand below the worst numbers we have seen since the housing crash started in 2006. The rubber bands and duct tape are breaking apart. Presume the fix of a fall is in.
The oversight by major news outlets — snubbing record negatives — is egregious by virtue of its ignorance of the expiration of the free-down-payment program. The pending-home-sales stat gave us our first view of buyer demand for housing without the hugely popular prop from the federal government.
Speculation has run rampant as commentators have wondered about the direction of prices as government support starts to fall away.
The future direction of real estate prices is a major obsession of almost all economy watchers as the monthly bill for shelter overshadows others, as the value of homes is a predominant factor of family wealth, and because the banking sector has huge investments based upon residential property.
“If you’re looking for a silver lining in housing, you aren’t going to find it here,” Mike Larson of Weiss Research said. “Demand has fallen off a cliff in the wake of the tax credit expiration, with pending sales falling by the biggest margin ever to the lowest level ever.”
Among the outlets who failed to uncover either of the two record negative stats are Barrons, Dow Jones, The Financial Times, Fox Business, The Los Angeles Times, and Marketwatch.
HousingStory.net estimates current inventory for sale of 3.9 million is 1.2 million units higher than it should be, and not too far away from the record high 4.5 million. Inventory stands at 8.3 months of sales, but it should be at 5.8 months.
Fourteen percent of mortgages are behind on payments — about 7.7 million borrowers or, more starkly, one in seven. A record 4.63 percent of borrowers are in foreclosure. Approximately 13 million homeowners have no equity or negative equity. They would make nothing from the sale of their house if they could sell it. Or they would lose a little or a lot. Thus do we have the phenomena of strategic default — now as common as no-money-down mortgages during the boom.
No new cars for those never-built garages
Car sales for bother individual buyers and corporate fleets are cooling down even more, writes Jerry Hirsch at the Los Angeles Times:
Consumers had flocked to bargain events early this year, even for discounts at beleaguered Toyota Motor Corp., where massive recalls have raised quality control issues. But fewer shoppers are showing up at dealerships now and the previously fast pace of fleet sales is starting to tail off, said industry analyst Brian Johnson of Barclays Capital.
Originally, the consensus among auto industry analysts was that 11.9 million vehicles would be sold in the U.S. this year, according to Barclays. Now Barclays believes sales will settle to 11.2 million.
Johnson and other analysts blame low consumer confidence for the lackluster sales numbers.
“The problem is that people are still not sure about their jobs, their retirement accounts or the value of their homes,” said Jim Hossack, a consultant at AutoPacific Inc., a Tustin automotive market research firm.
At the start of the year, AutoPacific estimated that sales would reach as high as 11.7 million vehicles this year, but now Hossack thinks it will range from 11 million to 11.5 million.
On Tuesday, Goldman Sachs analyst Patrick Archambault trimmed his U.S. sales forecast this year to 11.7 million vehicles from 12 million. And corporate credit rating service Standard & Poor’s said sales are running 5.5% below its expectations of 11.7 million vehicle sales for the year.
“The recovery is just not as robust or as quick as first expected,” said analyst Chris Hopson at forecasting firm IHS Automotive, which Tuesday downgraded its estimate for annual sales to 11.5 million from 11.8 million.
Big Pharma, big layoff
Just-merged Merck is shedding one worker in seven as it retools following a major merger, reports New York Times blogger Natasha Singer.
The $41 billion merger last year of the drug giants Merck and Schering-Plough has a human cost for pharmaceutical industry employees.
Merck plans to lay off about 15 percent of its work force — about 15,000 people — over the next two years as part of a global merger restructuring, according to an announcement it issued on Thursday. Merck said it also planned to close eight research and eight manufacturing sites worldwide.
The restructuring is expected to save $2.7 billion to $3.1 billion in 2012, the company said. Meanwhile, the pretax cost of the initial phase of the cost-cutting program is expected to range from $3.5 billion to $4.3 billion, much of it in severance packages for employees.
But the military/industrial complex booms away
That old reliable engine of corporate profit — the one Ike warned us about in his farewell address — will keep raking in the long green in the coming fiscal year, according to Bloomberg reporter Tony Capaccio.
U.S. spending on weapons through 2016 likely will grow faster than the overall defense budget, which will have annual increases of only about 1 percent above inflation, according to Pentagon Comptroller Robert Hale.
“Our goal would be to get forces and modernization to grow by 2 or 3 percent,” Hale said in an interview, while saying that “it’s not a given.”
An increase in weapons spending will include greater purchases of Bethesda, Maryland-based Lockheed Martin Corp.’s F- 35 fighter, new ground vehicles, ship construction, satellite systems and unmanned drones, according to the Pentagon’s long- range plan. Northrop Grumman Corp., of Los Angeles, and Chicago- based Boeing Co. also stand to benefit.
Some money may be shifted into equipment and personnel accounts from an effort to cut $100 billion of overhead costs over five years, announced by Defense Secretary Robert Gates on June 28, Hale said.
“Procurement and research are in the ‘gaining’ portion of the budget,” Hale said. “The goal would be to move money from support-type activities — operations and maintenance, military construction — into acquisition.”
Hale’s remarks are good news for defense contractors, said Todd Harrison, a defense analyst with the Washington-based Center for Strategic and Budgetary Assessments.
“It sounds like they are trying to do everything they can now to avoid major program cuts in the next few years,” Harrison said. Yet, if the Pentagon goal of cutting overhead and support costs isn’t achieved, “they will have no choice but to cut” programs, he said.