Economic News Articles in The Great Recession Blog, week of 05/20/2012
At the start of last week, economists were feeling rosy. They thought housing was up, and the stock market was up after a long fall. They even thought the job market was doing better. Meanwhile, I continued to wonder why they continue to get paid. Apparently they have that same kind of job security that weather people have where, no matter how often it rains on their declared sunny days, they still keep their jobs.
Again, the problem was that they are doting upon the best news they can find. They are, for example, claiming the job market is up when it only went up by 2,000 new jobs. In a nation the size of the U.S. that is less than one extra new job per town. Should we all feel in recovery because the local Albertson’s added a night Janitor? If waves on the ocean were this small, we’d say the seas were flat or were as smooth as glass. I think these talking heads on television who are reportedly economists have become entranced with their own reflections, so they are hardly seeing what the sea is doing around them.
While NPR said that economists were more upbeat about “recovery” in jobs, as if there has been some sort of recovery, another article reported things a little more accurately with a headline that said jobs were “little changed.” It, at least, said that the labor market “recovery” had “paused.” I.e., no more “recovery for now. They also gave a little more info about the loss of this dim recovery: job creation has lost its steam as companies added the fewest number of people since last October.
Yet, that article had too much good news to be true, too:
Economists foresee the pace of job creation rising to 150,000 from April’s six-month low, according to the median estimate in a Bloomberg News survey. Even so, such a rate of job creation would be lower than any month in the first quarter.
The economists have been staring at the sun too long, trying to see the bright side of things. Their estimates have been routinely too high most of the time on many things. I doubt that we will see jobs rise to 150,000 in May. Even if we did, it would take forever to recover the millions of jobs lost in the great recession at that rate, as that doesn’t even keep up with population growth.
You can see the same thing in last week’s articles about the rise in home sales where the only thing keeping opinion aloft was hot air. Sales were reported as rising “more than expected in April” — up more than three percent over March and almost ten percent over the same time last year. When you consider that mortgages have hit all-time lows, you might expect a few adventuresome folk who have been waiting out the recession to finally jump in. Some did. Not many. This was billed as the “recovery was gaining traction.”
Ironically, that article said sales were up, even though job growth had slowed over recent months. (Notice the plural.) One has to wonder how months of slowing job growth could be billed as a “recovery” by other reporters. It is a matter of people trying their best to strain out what good news they can and making too much of it.
The next article I posted on the subject also called the changes in the housing market “hopeful”:
Americans are buying more homes in every region of the country, the latest indication that the housing market could be on the mend. An increasing portion of those sales are from first-time buyers, who are critical to a housing recovery.
I think all we are seeing is that first-time buyers have been waiting a long time for prices to get back down to where they can get in. With the lowest interest rates ever, some are now taking the plunge. I don’t think this will sustain for long. But the economists with rosey glasses couldn’t wait to jump in on this news:
“The trend in sales is upward, and we think it has a good deal further to go over the next few months as payrolls pick up further and mortgage availability improves,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics.
What pick up in payrolls? According to one of the articles above payrolls have stalled. According to this same housing article, job growth has been slowing. At best, it is flat. That makes it an interesting jump to proclaim that housing sales will increase because of payroll increases. The premise housing increase is highly doubtful, especially with news coming out the very next day that manufacturing had slowed down again.
Here’s the impending downside on housing, even in this article, though the reporters and commentators all fail to see it:
The decrease in foreclosures helped boost the year-over-year median sales price in April.
We all know — if we stop to think about it — that this decrease in foreclosures is not likely to last now that the banking foreclosure case has been settled. It takes a little time for foreclosures to move through the twists and turns of the foreclosure pipeline, so foreclosures that were held up a year by the foreclosure case may not be appearing much yet. Nevertheless, they are bound to get through the pipe eventually, even as banks choose to write down some of the losses and not foreclose on all properties because there are more to foreclose on than they are able to handle.
The article continues …
Builders have grown more confident since last fall, in part because more people have expressed an interest in buying a home. In May, builder optimism rose to the highest level in five years…. Last week, the Commerce Department reported that builders started work on more homes and apartments in April, pushing housing construction to a seasonally adjusted annual rate of 717,000 homes. That was near a rate of 720,000 homes and apartments being built in January, which had been a three-year high. But even with the recent strength, housing starts remains at roughly half the pace that economists consider healthy.
If you read between the lines there, things looked better back in January (traditionally a very slow building month) than they look today — some five months later — so how has there been continued housing recovery in between? That’s why I say “what recovery?” Rather, you have a three month slump between two high months where even the high months are only half what the housing market was before the Great Recession. That doesn’t sound much like “recovery” in process to me — a long slump with two low high points.
Many economists believe that 2012 could be the year that housing finally makes a positive contribution to overall economic growth.
All I can say to that is, “Figures!” Not “figures that housing will contribute to growth.” Figures that economists would believe such a thing.
Apparently, the average American is a lot smarter than the above-average economist. A Rasmussen poll out last week said that eighty percent of Americans have a negative outlook on the economy, and a full fifty percent believe the United States will go bankrupt! Those numbers should be good for my readership 😉
Not too surprisingly, things continued to slide into the sewer for the Euro Zone. Even less surprisingly, nuclear talks with Iran ended with not much more than a pledge to talk again. In Israel’s opinion (and mine) Iran is just stalling for time. Every month that goes by is more uranium ready for the final stage of enrichment. It’s a fairly short step between 20% enrichment that Iran has now and weapons-grade material. During this delay, we now discover, Iran has installed more centrifuges in order to proceed faster in the time it has remaining. I’m sure that racing against the clock like that was essential for medical research, which is Iran stated reason for needing highly enriched uranium.
Which brings to mind the realization that there is one other group of people who are like economic experts. Those would be nuclear experts. Remember the talking heads on television from the various nuclear regulatory agencies around the world and at the U.N. who said the reactors at Fukushima would never melt down? You will not be surprised to hear that I thought, at the time, they were either idiots or liars, protecting their own industries. I wondered how anyone could make such assured predictions when the reactors had suffered two earthquakes over 8.0 and then a massive tsunami so they were badly rattled to near their limits to begin with and then over a thousand smaller earthquakes (some as high as 6.7) while also enduring extreme overheating due to power loss on the cooling system and then had tons of extremely cold and corrosive sea water dumped on top of their glowing parts … repeatedly … and finally suffered the explosions of their containment buildings.
It seemed a bit rosy to me to proclaim with such assurance they wouldn’t melt down. In fact, it seemed evident to me that they were already melting down since radioactivity was already leaking everywhere. Eventually, it was discovered that four of the reactors had melted down to some degree or another, some right through the bottom of the main containment vessel. Apparently, the nuclear experts are as willing to believe in the endless resiliency of nuclear reactors under all conceivable strains as the economic experts are willing to believe in the endless resiliency of an economy that is in meltdown .
Is it any wonder, then, that we learned last week that Fukushima has nuclear worries of an even greater kind? I would imagine it was much to the surprise of all these nuclear experts to find that all those earthquakes and explosions and extreme temperature changes had damaged the cooling ponds for spent fuel. If another major earthquake happens, one of these overhead ponds could break, and that would result in the worst “nuclear storm” the world has ever seen — “The health consequences of [of which] are beyond where science has ever gone before.”
“It is no exaggeration to say that the fate of Japan and the whole world depends on No. 4 reactor.” (CTV)
Nice. If the reactor people aren’t any better than the economic experts, you can kiss your rosy skin goodbye.
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Recap of economic news articles on The Great Recession Blog last week
(Current week’s news is posted in the right sidebar each day.)
Economic indicators and stock market responses in the news this week
- 05/21 Economists A Bit More Upbeat About Jobs, Housing A new survey shows U.S. economists are growing slightly more optimistic about recovery in the job and housing markets.
- 05/21 Stocks rebound after biggest weekly drop in 2012 Global stocks on Monday rebounded from lows for the year and oil prices rose for the first time in four sessions as world leaders emphasized support for growth in the euro zone.
- 05/22 Creaking Infrastructure Seen Hampering Economic Recovery Ramshackle roads, crowded waterways and other creaking infrastructure could slow recovery as businesses spend more time and money sidestepping roadblocks or paying for more expensive shipping, experts say.
- 05/22 US home sales up across the country, hopeful sign Sales of previously occupied homes rose 3.4% in April from March. An increasing portion of those sales are from first-time buyers, who are critical to a housing recovery.
- 05/23 New Home Sales Rise More Than Expected in April New U.S. single-family home sales rose more than expected in April and prices pushed higher, further evidence the housing market was turning the corner. The Commerce Department said on Wednesday sales increased 3.3%.
- 05/24 Jobless Claims in U.S. Were Little Changed at 370,000 The Labor Department said weekly applications for benefits dipped by 2,000 to a seasonally adjusted 370,000. Applications have leveled off this month after declining from April’s five-month high, adding to evidence the labor market recovery may have pause.
- 05/24 US manufacturing growth slows in May US manufacturing growth slowed in May as exports weakened. Core capital goods orders fell 1.9%. “US manufacturing seems to be repeating the trend seen in the previous two years, whereby a strong start to the year loses momentum as summer approaches.”
Economic predictions / forecasts that made news headlines
- 05/22 Rasmussen Poll: 50% Say US Will Go Bankrupt 80 percent of respondents still rate the national economy negatively, and 83%, believe they are no better off now than they were at the beginning of the Obama administration.
Euro crisis updates as the Great Recession goes viral
- 05/21 Europe’s debt crisis joins governments and banks at the hip Euro governments and banks are locked in an embrace so tight that disaster for one would almost certainly spell doom for the other.
- 05/21 G-8 Press Greece to Stay in Euro as Merkel Sticks to Austerity German Chancellor Angela Merkel was on the spot at the Camp David summit as she faced growing pressure to shift her austerity-first approach. France’s new president found an ally in Obama for his resistance to the German-led drive for balanced budgets.
- 05/21 Hollande, ‘Grexit’ & The Future Of EurobondsLeaders from Italy, Spain and Ireland all support Francois Hollande’s push for Eurobonds and stimulus programs in the peripheral countries, but it won’t happen if Merkel can stop it. Does Hollande now have a mandate to go toe to toe with Merkel.
- 05/21 Mighty Merkel may be the odd woman out A grand coalition of leaders including President Barack Obama, Hollande, Italy’s Monti and Spain’s Rajoy want to press Merkel and her allies to a flexible approach to buttress Spanish banks, tackle the Italian deficit and save a rapidly crumbling Greece.
- 05/21 What could happen next if Greece leaves the eurozone? Click on the labels on the graphic to read more about some of the possible consequences.
- 05/22 OECD: Eurozone Crisis Threatens Global Recovery OECD Chief Economist Pier Carlo Padoan warned the eurozone economy could contract by as much as 2 percent this year. “We see the situation in the euro area close to the possible [worst-case] scenario, which … could lead to a severe recession….”
- 05/23 Bank of England ‘finely balanced’ over more stimulus Bank of England policymakers voted by 8-1 this month against pumping more money into the economy (quantitative easing), but the decision was “finely balanced” for some members. “Further monetary stimulus could be added if the outlook warranted it.”
- 05/23 E.U. Leaders Gather Again in Brussels Over Greek Crisis European Union leaders converged on Brussels for yet more talks on how to address the intensifying Greek crisis and the existential threat to the euro. Fear in the market was palpable, leading investors to move euros out of struggling periphery countries.
- 05/23 Euro Zone Officials Agree to Prepare for Greek Exit Scenario Committee decides each euro zone country will have to prepare a contingency plan for the eventuality of Greece exiting the euro. While the Greek Finance Ministry denies such an agreement, Reuters has seen a memo confirmed by three euro officials.
- 05/23 Euro-Zone Leaders Step Up Greece Contingency Plans Euro-zone leaders planned for containment of a possible Greek exit as they reaffirmed their commitment to the German-backed austerity plan and expressed their desire to see a new majority government in Greece that will continue implementing the plan.
- 05/23 European stock markets fall amid Greece concerns Shares fell after a report quoted former Greek Prime Minister Lucas Papademos saying that the Greek government may be making preparations for leaving the euro. By lunchtime shares in London, Paris and Frankfurt were down about 2%.
- 05/23 Greece Rattles Global Markets: Gold, Oil ‘Getting Crushed’ Fears that Greece could leave the euro zone, triggering an exodus by other weak sovereigns, sinking stocks and sending the euro to a 22-month low. Buyers rushed into U.S. Treasuries, pushing yields close to historic lows.
- 05/23 Secret Central Bank Aid Props Up Greek Banks No terms or conditions have been disclosed, but Greece’s banking system is being propped up by an estimated €100 billion oof emergency “liquidity” [Q.E.?] provided by the country’s central bank — approved secretly by the European Central Bank.
- 05/23 Tech sell-off, Greece worries hit US stocks Tech shares led a broad sell-off on Wall Street Wednesday, following disappointing earnings, sales and outlook from Dell. Worries about Greece leaving the eurozone added to the pessimism. “The concern is that this goes beyond just Dell.”
- 05/24 British recession deepens as euro zone woes mount A slump in construction output drove Britain even deeper into recession than initially thought in the first quarter of this year, raising the chance the Bank of England will inject more cash to prop up the faltering economy.
- 05/24 European business activity falls to near three-year low US manufacturing growth slowed in May as exports weakened. Core capital goods orders, which economists use as a gauge for business investment plans, fell 1.9%. “Businesses are hesitating to invest in the face of worsening uncertainties.”
- 05/24 Much Euro Ado About Nothing A meeting of euro-zone leaders that wasn’t designed to decide anything didn’t actually decide anything. So what? There’s little policy makers can do about Greece before the elections. If they don’t stick by demands, they aid parties opposing the demands.
- 05/24 What would Greek exit mean for the U.S. economy? The U.S. and global economy could fall back into recession, and some economists warn it would be far deeper and more dangerous than the one of 2007-2009. The U.S. Fed would be almost certain to embark on more quantitative easing.
- 05/25 Euro posts worst week in five months Spain’s Catalonia asks for help, raises contagion fears. Catalonia’s appeal reverberated across financial markets. Spanish and Italian bonds sold off, equities fell, and U.S. crude futures turned negative.
- 05/25 In Spain, Bank Transfers Reflect Broader FearsThe condition of Spanish banks is expected to worsen as commercial real estate and mortgage losses, a big source of the nation’s bank troubles, continue to mount and as depositors continue to move their money out of the country at an increasing rate.
- 05/25 Spain region and Greek exit warnings rattle euro zone Central banks and companies NOT bracing for a possible Greek euro exit would be making a grave professional error, Belgium’s foreign minister said on Friday, rattling markets already alarmed by Spain’s deteriorating finances.
- 05/26 Now Spain Circles the Drain What’s happening in Spain is not contagion, therefore it is not sufficient to provide a financial firewall through the ECB. The place is going bust because of its own actions. A solution to the Greek problems will not become a solution to Spain’s.
The Iranium Reaction as it makes and shakes the news
- 05/22 Iran ‘committed to Israel’s annihilation,’ says top Iranian general When Ahmadinejad purportedly said Israel “should be wiped off the map” there were many who argued that the Iranian leader was mistranslated. No such argument can be made regarding the latest comments by the chief of staff of the Iranian armed forces.
- 05/22 Israel’s Prime Minister: Iran must halt uranium enrichment, stockpiling Two days before world powers convene in Baghdad for talks with Iran, Benjamin Netanyahu unequivocally declared that Israel would only be satisfied if Iran halted ALL uranium enrichment, deported its stockpiles and closed its Qom facility.
- 05/22 U.S. Senate approves tougher Iran sanctions In a move that could stiffen Iran’s spine, the US Senate unanimously approved on Monday a package of new economic sanctions on Iran’s oil sector just days ahead of a meeting in Baghdad between major world powers and Tehran.
- 05/22 Word Of Deal To Inspect Iran’s Nuclear Program Raises Hopes For Broader Talks Inspectors have been trying to gain wider access to Iranian atomic facilities. If this deal is finalized, it would be “the first time since 2007 that Iran has accepted wider inspections.”
- 05/23 Israel Defense Ministers: Iran’s readiness to make deal is trickery Israeli officials react with extreme skepticism to IAEA chief’s claims that Iran’s nuclear deal is close to being signed. “Iran has proven over the years its lack of credibility … and, therefore, we have to be suspicious of them all the time.”
- 05/24 Iran Nuclear Talks End With No Deal; New Meeting in June Talks between Iran and six world powers on its disputed nuclear program failed to produce a breakthrough on Thursday in what appeared to be a disappointment to the Iranian side, which had hoped for an easing of the onerous economic sanctions imposed by the U.N.
- 05/24 Iran talks with world powers hit snag over sanctions Iran accused world powers on Thursday of creating “a difficult atmosphere” that had hindered talks on its atomic energy program, signaling a snag in diplomacy. Iran demanded rapid relief from sanctions. There was no sign of either breakdown or breakthrough.
- 05/24 Oil up over 1 percent on Iran talks snag, weak data Crude oil futures rose more than 1 percent on Thursday, rebounding from the previous session’s slump, as talks between world powers and Iran over its nuclear program hit a snag, stirring fears of supply disruption and a new Mideast conflict.
- 05/24 US Senate mulls unprecedented military aid to Israel The possibly unanimous bill seeks to further expand security aid so as to improve Israel’s capabilities vis-à-vis Iran. The bill proposes shared satellite intelligence, aerial refueling tankers, specialized munitions and transfer of surplus gear from Iraq.
- 05/25 Iran installed more enrichment centrifuges UN watchdog report to show Islamic Republic placed another 350 centrifuges at Fordow facility, potentially boosting output capacity of nuclear work major powers want to stop.
- 05/25 Iran rejects West’s plan to curb nuclear program“We are urgent about it, because every day we don’t figure this out is a day they keep going forward with a nuclear program,” said a U.S. official. “We still think we have some time for diplomacy, but it’s not indefinite.”
- 05/25 U.N. Finds Uranium in Iran Enriched to Higher Level United Nations nuclear inspectors in Iran have found uranium enriched beyond the highest previously reported levels, according to a diplomat in Vienna who said that the elevated reading (27%) would be addressed in the inspectors quarterly report.
U.S. banking / financial crisis as it shapes the economic news of our times
- 05/21 JPMorgan Loss Will Probably Hit $7 Billion JPMorgan will have to pay even more for the protection as the market declines. Hedge funds are unlikely to let the bank escape without more losses. CEO Jamie Dimon reportedly “couldn’t breathe” upon discovering the magnitude of the botched trading.
Other economic updates / miscellaneous news articles
- 05/21 Facebook Shares Sink 11%, Slashing Value by $11 Billion Facebook left some investors down almost 25% from where they were Friday and driving others to switch back to more established stocks. Facebook’s underwriter, Morgan Stanley’s ranted about glitches that left trades unclear.
- 05/22 Fukushima Reactor 4 poses potential massive global risk More than a year after a devastating earthquake and tsunami triggered a massive nuclear disaster, experts are warning that Japan isn’t out of the woods yet and the worst nuclear storm the world has ever seen could be just one earthquake away from reality.
- 05/23 Fitch Downgrades Japan Fitch Ratings on Tuesday delivered a surprise jolt to Japan’s political leadership, downgrading the sovereign rating and blasting the government for taking a “leisurely” approach to solving the country’s spiraling debt problems.
- 05/23 Gold Loses its Hold Gold buying has fizzled out. “There are days here where we wonder if the phones are working.” Last week, gold slid to a four-month low of $1,527 a troy ounce, down 20.5 per cent from its record high of $1,920 last September.
- 05/23 Morgan Stanley, Goldman Sachs Sued Over Facebook IPO Morgan Stanley, Goldman Sachs, JPMorgan Chase & Co., BofA, and members of Facebook’s board were sued by investors who claimed they were misled. “The true facts … were that Facebook was … experiencing a severe and pronounced reduction in revenue growth
- 05/24 Facebook, JPMorgan gaffs erode faith in Wall St. Wall Street appears bent on convincing Main Street that the game is rigged.
- 05/25 Obama Claims GOP ‘Standing In Way’ Of Recovery “Either they say they want to do nothing … or they want to double down on some of the policies that didn’t work and got us into this mess in the first place,” Obama told voters in Iowa, citing in particular proposed tax cuts for the wealthy.
- 05/25 Obama: I’m Cleaning Up “Wild Debts” Caused By Republicans “I don’t know how they’ve been bamboozling folks into thinking … they are the responsible, fiscally-disciplined party. They run up … wild debts … then when we take over we have to clean it up … then they point and say, ‘Look how irresponsible they are.’”
- 05/25 Real federal deficit dwarfs official tally Deficits are a major issue in this year’s presidential campaign, but USA TODAY has calculated federal finances under accounting rules since 2004 and found no correlation between fluctuations in the deficit and which party ran Congress or the White House.