Posts Tagged ‘Great Recession’
Wednesday, June 2nd, 2010
The Great Recession has taken a toll on the famous American optimism and belief in social mobility as defined by the 
stories of such luminaries as Alexis de Tocqueville, Horatio Alger and Barack Obama. According to a poll by YouGov for The Economist, 39 percent responded that the opportunities available to them were not as positive as their parents’ experiences; just 36 percent reporting having greater opportunities than the previous generation. Approximately 50 percent think that the next generation will have a lower standard of living and fewer opportunities for social mobility.
This trend is not new. According to The Economist, “In 1963, John Kennedy declared that a rising tide lifts all boats. Indeed, in 1963 this was true. Between 1947 and 1973, the typical American family income roughly doubled in real terms. Between 1973 and 2007, it grew by only 22 percent – and this thanks to the rise in two-worker households. In 2004, men in their 30s earned 12 percent lease in real terms than their fathers did at a similar age, according to Pew’s Economic Mobility Project. This has been blamed on everything from immigration to trade to declining rates of unionization. But the driving factor, most economists agree, has been technological change and the consequent lowering of demand for middle-skilled workers.”
Americans tend to be remarkably accepting of comparatively high disparities in income because they still believe in upward mobility. The truth is that America does offer opportunity, though perhaps not as much as most people believe. A better yardstick of income potential is parental salaries, which suggests that social mobility is a less powerful indicator. Americans born to the middle class have a 50/50 chance of moving up or down in income, according to the Economic Mobility Project.
Tags: Alexis de Tocqueville, Great Recession, Horatio Alger, John F Kennedy, Pew Economic Mobility Project, President Barack Obama, social mobility, standard of living, The Economist, upward mobility, YouGov
Posted in Development, Economics | No Comments »
Tuesday, May 18th, 2010
The latest numbers on housing starts, new home sales and rising prices indicate that the residential recovery is for real. Because the housing crash was a primary cause of the Great Recession, word that the sector is rebounding is good news. Housing permits and starts have increased in the last several months, and new house sales increased in March.
Even though the Case-Shiller home price index showed mixed numbers for January and February, there was better news found in a recent government report on the producer price index for single-family residential construction through March. This measure of the average change in the cost of materials for new home construction has risen three percent since last summer. Economists are interested in the producer price index because it is a critical factor in the pricing of existing homes. Inflation hawks may claim that this statistic is a portent of rising prices in the general economy.
According to Casey B. Mulligan, an economist at the University of Chicago, a little inflation is not a bad thing for housing. “It’s quite possible that inflation-adjusted housing prices will not significantly increase, but even if a housing price increase resulted merely from general inflation, it would be welcome because anything that raises housing prices can help alleviate the extraordinary prevalence of foreclosures that derives largely from the fact that debt-strapped homeowners can no longer sell their homes for enough to cover their mortgage,” Mulligan said.
Tags: Case-Shiller home price index, Casey B Mulligan, Economist, Great Recession, housing crash, inflation, producer price index, residential market, Standard & Poors 500, University of Chicago
Posted in Economics, Residential | No Comments »
Thursday, May 13th, 2010
A 2010 survey conducted by the National Association of Business Economists (NABE) released in April confirms that the economy is in recovery, with industry demand showing expansion for a third consecutive quarter. There’s good news in the fact that expectations for economic growth have spiked significantly. Approximately 25 percent of survey respondents believe the real GDP for 2010 will grow by at least three percent; 70 percent believe the economy will expand at a two percent rate this year.
In terms of job creation, the NABE survey noted the first increase in employment in two years. The number of firms adding to their payrolls rose to 22 percent, compared with just 13 percent reported in January. According to the survey, companies cutting jobs fell from 28 percent in January to just 13 percent in April. The number of companies planning to add employees in the next six months rose to 37 percent, compared with the 29 percent reported in January.
“NABE’s April 2010 Industrial Survey confirms that the U.S. recovery from the Great Recession continues, with business conditions improving,” said William Strauss of the Federal Reserve Bank of Chicago. “Industry demand moved higher compared to results in the January 2010 report, pointing to stronger growth in 2010. While input costs have been increasing, prices have also been moving higher, allowing profits to continue to rise. After more than two years of job losses, job creation increased in the first quarter of 2010, suggesting a better outlook for hiring over the next six months. Little of the improvement to date in job growth can be attributed to the stimulus bill enacted in February 2009. Capital spending remained steady. Tight credit conditions continued to negatively impact business conditions.”
To listen to an interview with the Fed’s Rick Mattoon about the recovery, click here.
Tags: capital spending, economic recovery, Federal Reserve Bank of Chicago, GDP, Great Recession, job creation, NABE April 2010 Industrial Survey, National Association of Business Exexutives, stimulus bill, William Strauss
Posted in Economics | No Comments »
Monday, March 29th, 2010
The Congressional Budget Office has determined that the Troubled Asset Relief Program (TARP) will cost the government $109 billion – just 16 percent of the $700 billion set aside to rescue the nation from the great recession. Insurance giant AIG and the auto industry are TARP’s largest beneficiaries.
The federal government bought $40 billion in AIG preferred stock and created a $30 billion line of credit for the firm. Earlier CBO estimates that AIG would cost the government $9 billion; since AIG hasn’t paid the Treasury Department the quarterly dividend it owes, the CBO increased its projected loss to $36 billion or more than half of the bailout cost. The CBO estimates that TARP will lose $34 billion from its bailout of Chrysler and General Motors.
TARP’s mortgage modification program is estimated to use less than $20 billion, less than half of the $50 billion set aside to help people stay in their homes. The CBO says that fewer people will participate in the program than anticipated. When President Barack Obama announced the program in February of 2009, he said that as many as four million homeowners could reduce their monthly payments to no more than 31 percent of their pre-tax incomes. At the end of February, only 170,000 distressed homeowners had taken advantage of the mortgage modification program.
Tags: AIG, auto industry, Chrysler, Congressional Budget Office, General Motors, Great Recession, President Barack Obama, TARP, Treasury Department
Posted in Economics, Financing, General, Residential | No Comments »
Tuesday, March 23rd, 2010
A combination of limited supply growth and anticipated stabilization of the jobs market could mean that office rents may return to positive growth sooner rather than later. That’s the opinion of Victor Calanog, a researcher at Reis, Inc., one of the nation’s leading providers of commercial real estate performance information and analysis.
According to Calanog, “Office properties took the brunt of the recession last year, with rents falling at record rates. Effective rents cratered by 8.9 percent, the largest decline on record in almost 30 years of Reis history. Hidden amidst the devastation were signs that office occupancies were faring better than other property sectors. While multifamily and retail vacancies were hitting highs unseen in two decades or more, the national office vacancy rate was 17 percent at the end of 2009, the highest level since 2004.”
The percentage of office properties that had reduced their rents hit 86 percent in the 4th quarter of 2009. Calanog predicts that office rents in Washington, D.C., could be higher than those in Manhattan by the end of 2010.
The good news is that recent labor market figures are encouraging, with the unemployment rate holding steady at just under 10 percent nationally. Wall Street firms have started hiring again and job losses in New York were not as dire as predicted. “Unexpected events can derail this recovery, and economic growth is expected to be fragile for the near term, but as more positive news emerges we may be on track to seeing rents grow as early as next year,” Calanog said. “If this is the case, transaction volume and prices may pick up quickly to capitalize on the next upswing.”
Tags: Great Recession, Manhattan, office market, Reis Inc, rental rates, unemployment rate, Victor Calanog, Wall Street, Washington DC
Posted in Development, Office | No Comments »
Monday, March 8th, 2010
Economic indicators show that the recession is over. This is the opinion of Rick Mattoon, a senior economist and advisor in the economic research department of the Federal Reserve Bank of Chicago and a lecturer at the Kellogg School of Management at Northwestern University. Rick’s primary research focuses on issues facing the Midwest regional economy.
In a recent interview for the Alter NOW Podcasts, Mattoon warned that most people probably don’t feel like the nation is coming out of a recession because there are few signs of job creation or easier access to credit. One of the major concerns economists have is that this will be a double-dip “W-shaped” recession because once the bump from the $787 billion stimulus ends, there will be scant pent-up consumer demand for products and services to take the place of government spending.
One positive sign is an uptick in hiring by temporary employment agencies, which usually is considered to be a good harbinger of what future demand will be. Another interesting theory about this particular recession in terms of jobs is the idea that companies adjusted their employee levels much more aggressively at the beginning of this cycle. As a result, they are operating at extremely lean levels and so may hire earlier rather than later.
One problem is that there is a skills mismatch in the economy. Many people who have lost their jobs don’t possess the right skills to find employment in growth industries such as clean energy or healthcare. The challenge is training these individuals to bring their skills up to par.
Rick Mattoon: Is the Recession Over? :
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Tags: American Recovery and Reinvestment Act, Chicago, deficit, Federal Reserve Bank, GDP, Great Recession, inflation, Rick Mattoon, stimulus bill, treasury bills, wage growth
Posted in Economics, Financing, General, Green, Healthcare, Office, Residential | No Comments »
Wednesday, January 27th, 2010
President Barack Obama is angry with the big Wall Street banks that took TARP dollars and plans to do something about it. “We want our money back and we’re going to get it,” Obama said in a White House speech when he proposed the Financial Crisis Responsibility Fee. “If these companies are in good enough shape to afford massive bonuses, they surely are in good enough shape to afford to pay back every penny to taxpayers.”
The President’s proposal – which requires Congressional approval – would apply to approximately 50 of the nation’s largest financial institutions and rake in $9 billion a year for at least a decade. Envisioned is an annual 0.15 percent fee on liabilities – except for insured deposits – and would be assessed on banks, insurance companies and financial firms with a minimum of $50 billion in assets. The objective is to counterbalance $117 billion in losses from TARP. The 10 largest financial firms would pay approximately 60 percent of the fee.
“My commitment is to recover every single dime the American people are owned,” according to the President. “And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people, folks who have not been made whole and who continue to face real hardship in this recession.”
Not surprisingly, banks were not pleased with President Obama’s proposal. “Two-thirds of the TARP investment from banks has already been repaid, with a large profit to the taxpayer,” countered Steve Bartlett, president of the industry trade group, the Financial Services Roundtable. “This tax is strictly political.”
Another viewpoint advanced is that banks that haven’t repaid TARP funds haven’t done so because they served the original intent of the program – they made loans to consumers and businesses.
Tags: bonus, budget, department of treasury, Great Recession, President Obama, TARP, taxpayer bailouts, Troubled Assets Relief Program, Wall Street
Posted in Economics, Financing | No Comments »
Monday, December 14th, 2009
With the national unemployment rate at 10.2 percent, President Barack Obama is focusing on job creation – the American public’s number one concern. The administration’s “White House to Main Street” summit and tour is gathering advice from a variety of stakeholders, including business executives, small-business owners, economists, union officials and Ed Pawlowski, the mayor of hard-hit Allentown, PA.
The stakes are high because the Obama administration finds itself in the difficult position of wanting to create millions of new jobs without adding to the national debt. “There’s one group that says we need to do more about the economy, more to create jobs,” according to political analyst Charlie Cook. “And then there’s the other side that’s saying we’re blowing the heck out of the budget deficits. And so they’re getting squeezed.”
“If we keep on adding to the debt, even in the midst of this recovery, at some point people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession,” the President said in an interview with Fox News.
In the meantime, Congress is considering job stimulus legislation that could combine extensions of COBRA, unemployment compensation and food stamps. Because the Democrats have very little money to spend right now, they know that a successful second stimulus will have to pack a powerful punch. Senator Mark Warner (D-VA) wants to use $50 billion in leftover TARP funds to provide loans to small businesses. Yet another proposal from Senator Jack Reed (D-RI) would use $600 million to subsidize employees who volunteer to have their hours cut to help companies avoid layoffs. This approach has worked spectacularly well in Germany, which has not seen an uptick in unemployment this recession.
Tags: Charlie Cook, Clinton administration, COBRA, Concord Coalition, congress, democrats, Economic Policy Institute, Ed Pawlowski, food stamps, Great Depression, Great Recession, job stimulus, President Obama, Senator Jack Reed, Senator Mark Warner, TARP, unemployment, unemployment compensation
Posted in Economics, General | No Comments »
Monday, November 2nd, 2009
Although the Great Recession has created hardships for millions of Americans, it has been the stimulus for a giant sale of consumer items. Houses in some Detroit neighborhoods can be purchased for the price of a new car. Everything from big-screen televisions to clothing are being sold at deep discounts. Hotel rooms cost approximately 20 percent less than a year ago, the largest decline since Smith Travel Research began collecting data in 1987. Even Tiffany engagement rings are on sale.
“This is the new normal,” says Donald Kerpta, president of the Chicago-based Dominick’s supermarket chain which has slashed prices as much as 30 percent on thousands of products. “We aren’t going back.” Karen Wilmes, a Rhode Islander who writes the Frugal Rhode Island Mama blog, says “The deals out there are unbelievable. We can put the money I save toward something else.”
Last year’s financial collapse wiped out 11 percent ($6.6 trillion) of America’s household wealth in just six months. It also ended the easy credit that had driven the consumption that characterized the economy over the last decade. Now, prices are falling at the fastest pace in decades. The federal Consumer Price Index, which measures the average cost of goods and services, has fallen 1.5 percent this year. The 2.1 percent decline in prices recorded in July was the biggest since 1950. Although energy prices have shown the steepest declines, food, appliances, furniture, jewelry, sporting goods, audio and visual equipment, and apartment rents also are falling. Because consumer spending accounts for 70 percent of the U.S. economy, retailers are hoping that the deep discounts will jump-start their businesses.
Tags: apartment rent, Cash for Clunkers, consumer items, Dominick's, Great Recession, Macy's, Smith Travel Research, Tiffany
Posted in Economics | No Comments »