The (inevitable) economic downturn
08-29-2007, 11:51 AM
#1
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Joined APC: Oct 2006
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The (inevitable) economic downturn
Ok people, here are 6 articles supporting the idea that the inevitable recession is in the near term... what does this mean for the airline industry? Hiring freeze? Mass furloughs? Mesa China becoming the employer of choice? Saabrooski getting dumped by his g/f & going to work for Skyhigh?
Discuss.
Summers: Recession threat worst since 9/11
By Bloomberg News | August 27, 2007
WASHINGTON -- Former Treasury Secretary Lawrence Summers said the threat of a recession in the United States is the greatest since the Sept. 11, 2001, terrorist attacks.
"I do not think we yet would have a basis for making a prediction that there will be a recession, but I will say that the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11," Summers said yesterday on ABC's "This Week" program.
Summers, who served under President Bill Clinton, said it would be "premature to judge this [subprime mortgage] crisis over," in part because "we can't yet know that there aren't more shoes to drop in the financial area."
Williams-Sonoma Profit Falls as Retailer Cuts Prices
By Cotten Timberlake
Aug. 29 (Bloomberg) -- Williams-Sonoma Inc., the biggest gourmet-cookware retailer in the U.S., said second-quarter profit fell 27 percent after it reduced prices on Pottery Barn home furnishings amid the worst housing recession in 16 years.
What are the major concerns on the Street today? Market analysts are starting to pronounce “recession,” that nasty “R” word once again. But most are saying that the US economy is going to avoid it for now. [edit]
But we do not hear much about the following:
The Fed relies mostly on lagging economic indicators and there is a risk that it will not drop the fed funds rate fast enough to prevent a recession. True, the Fed has lowered the discount rate in an attempt to restore confidence in the financial system. Yet, that does nothing to help the hurting consumer. The Fed is now behind the curve and the fed funds futures are predicting an immediate rate cut. As the stock market recovers, the Fed will feel less compelled to lower rates in a hurry. But it is a dangerous game to play. This is why a big rebound in stocks could be a setup for a large leg down in the coming months.
The fact that the global economy is strong now is not a good enough reason to say that a recession can be avoided. A strong economy now means we are at the top of a business cycle and there is a higher downside rather than an upside risk.
While most of the focus is on the financial sector, the consumer is starting to feel the pain from depreciating house prices. Lenders are being more selective and mortgage rates are rising. So far, the Fed has done nothing to help the consumers who make up 70 percent of the GDP, and it is questionable whether it can.
The fact remains that the American consumer is much more sensitive to the decline in the housing market than in the stock market. Low mortgage rates and rising property values helped keep the 2001 recession relatively shallow and painless despite the crashing stock market. The coming recession may prove to be much more difficult to weather. Consumers have lost their source of cash from refinancing. Many will now have much higher mortgage payments as a record number of ARMs get readjusted at the end of 2007 and in 2008. As a result, as many as 2 million foreclosures could occur in the near future.
Bernanke must avert a recession
Ben S. Bernanke, who became chairman of the Federal Reserve Board on Feb. 1, 2006, faces the biggest test of his leadership in the form of the credit crunch that has emerged from overzealous lending in the sub prime mortgage market. These conditions arose when credit was abundant after Sept. 11, 2001.
This should not have been a surprise. Adjustable rate mortgages were being sold at very low interest rates to many borrowers with no down payment, meaning they eventually had to be refinanced at higher rates that would increase future monthly payments. Meanwhile, home prices fell for those who bought at the peak of the sales trend in 2005. The result: Many homeowners had to come up with the difference between the current value of their homes and the originally priced mortgage. That left as many as 7 million home owners facing upfront payments of $20,000 to $50,000, plus bigger monthly payments because of higher interest rates for new mortgages that were replacing the adjustable ones. [edit]
Further delays by the Fed to accept the market signals and a decision to await the economy data that come with lags raises the odds of a recession.
A sobering census report
Wednesday, August 29, 2007
The economic party is winding down and most working Americans never even got near the punch bowl.
The Census Bureau reported Tuesday that median household income rose 0.7 percent last year - it's second annual increase in a row- to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005.
This seems like welcome news, but a deeper look at the belated improvement in these numbers - more than five years after the end of the last recession - underscores how the gains from economic growth have failed to benefit most of the population.
The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty - 5 million more than six years before, when the poverty rate fell to 11.3 percent.
What is perhaps most disturbing is that it appears this is as good as it's going to get. Sputtering under the weight of the credit crisis and the associated drop in the housing market, the economic expansion that started in 2001 looks like it might enter history with the dubious distinction of being the only sustained expansion on record in which the incomes of typical American households never reached the peak of the previous cycle.
It seems that ordinary working families are going to have to wait - at the very minimum - until the next cycle to make up the losses they suffered in this one. There's no guarantee they will.
The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains. The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.
This suggests that when household incomes rose, it was because more members of the household went to work, not because anybody got a bigger paycheck. The median income of working-age households, those headed by somebody younger than 65, remained more than 2 percent lower than in 2001, the year of the recession.
Overall, the new data on incomes and poverty mesh consistently with the pattern of the last five years, in which the spoils of the nation's economic growth have flowed almost exclusively to the wealthy and the extremely wealthy, leaving little for everybody else.
Standard measures of inequality did not increase last year, according to the new census data. But over a longer period, the trend becomes crystal clear: The only group for which earnings in 2006 exceeded those of 2000 were the households in the top 5 percent of the earnings distribution. For everybody else, they were lower.
This stilted distribution of rewards underscores how economic growth alone has been insufficient to provide better living standards for most American families. What are needed are policies to help spread benefits broadly - be it more progressive taxation, or policies to strengthen public education and increase access to affordable health care. Unfortunately, these policies are unlikely to come from the current White House. This administration prefers tax cuts for the lucky ones in the top 5 percent.
Market Scan
Subprime Spillover: Who's Next?
Ruthie Ackerman, 08.28.07, 6:30 PM ETThe billion dollar question on Wall Street these days is: Which companies will get swept away next in the subprime spillover?
As the financial sector attempts to dust itself off from its run-in with the subprime mortgage industry, investors are left wondering just how widespread the fallout is and which sectors will be impacted. ....
Al Goldman, chief investment officer at AG Edwards, said that if the United States is going into a recession and if the debt market is going to collapse then all firms will have problems; although those that live on their debt are at the most risk. But, Goldman says, he doesn’t see that as a valid risk since the country is not in a recession and the debt market hasn’t collapsed.
But Peter Dunay, investment strategist with Leeb Capital Management, was more pessimistic. “It’s not just the subprime real estate bonds that are not wanted anymore,” Dunay said. “Any low-quality bonds are being shunned by the Street.”
That means that companies outside the mortgage or finance industries that may not have strong earnings will find their cost of borrowing going up. If a company wanted to be an acquisition target, Dunay said, higher interest expenses make them less attractive targets.
Discuss.
Summers: Recession threat worst since 9/11
By Bloomberg News | August 27, 2007
WASHINGTON -- Former Treasury Secretary Lawrence Summers said the threat of a recession in the United States is the greatest since the Sept. 11, 2001, terrorist attacks.
"I do not think we yet would have a basis for making a prediction that there will be a recession, but I will say that the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11," Summers said yesterday on ABC's "This Week" program.
Summers, who served under President Bill Clinton, said it would be "premature to judge this [subprime mortgage] crisis over," in part because "we can't yet know that there aren't more shoes to drop in the financial area."
Williams-Sonoma Profit Falls as Retailer Cuts Prices
By Cotten Timberlake
Aug. 29 (Bloomberg) -- Williams-Sonoma Inc., the biggest gourmet-cookware retailer in the U.S., said second-quarter profit fell 27 percent after it reduced prices on Pottery Barn home furnishings amid the worst housing recession in 16 years.
What the "R" Word Brings to Gold
What are the major concerns on the Street today? Market analysts are starting to pronounce “recession,” that nasty “R” word once again. But most are saying that the US economy is going to avoid it for now. [edit]
But we do not hear much about the following:
The Fed relies mostly on lagging economic indicators and there is a risk that it will not drop the fed funds rate fast enough to prevent a recession. True, the Fed has lowered the discount rate in an attempt to restore confidence in the financial system. Yet, that does nothing to help the hurting consumer. The Fed is now behind the curve and the fed funds futures are predicting an immediate rate cut. As the stock market recovers, the Fed will feel less compelled to lower rates in a hurry. But it is a dangerous game to play. This is why a big rebound in stocks could be a setup for a large leg down in the coming months.
The fact that the global economy is strong now is not a good enough reason to say that a recession can be avoided. A strong economy now means we are at the top of a business cycle and there is a higher downside rather than an upside risk.
While most of the focus is on the financial sector, the consumer is starting to feel the pain from depreciating house prices. Lenders are being more selective and mortgage rates are rising. So far, the Fed has done nothing to help the consumers who make up 70 percent of the GDP, and it is questionable whether it can.
The fact remains that the American consumer is much more sensitive to the decline in the housing market than in the stock market. Low mortgage rates and rising property values helped keep the 2001 recession relatively shallow and painless despite the crashing stock market. The coming recession may prove to be much more difficult to weather. Consumers have lost their source of cash from refinancing. Many will now have much higher mortgage payments as a record number of ARMs get readjusted at the end of 2007 and in 2008. As a result, as many as 2 million foreclosures could occur in the near future.
Bernanke must avert a recession
Ben S. Bernanke, who became chairman of the Federal Reserve Board on Feb. 1, 2006, faces the biggest test of his leadership in the form of the credit crunch that has emerged from overzealous lending in the sub prime mortgage market. These conditions arose when credit was abundant after Sept. 11, 2001.
This should not have been a surprise. Adjustable rate mortgages were being sold at very low interest rates to many borrowers with no down payment, meaning they eventually had to be refinanced at higher rates that would increase future monthly payments. Meanwhile, home prices fell for those who bought at the peak of the sales trend in 2005. The result: Many homeowners had to come up with the difference between the current value of their homes and the originally priced mortgage. That left as many as 7 million home owners facing upfront payments of $20,000 to $50,000, plus bigger monthly payments because of higher interest rates for new mortgages that were replacing the adjustable ones. [edit]
Further delays by the Fed to accept the market signals and a decision to await the economy data that come with lags raises the odds of a recession.
A sobering census report
Wednesday, August 29, 2007
The economic party is winding down and most working Americans never even got near the punch bowl.
The Census Bureau reported Tuesday that median household income rose 0.7 percent last year - it's second annual increase in a row- to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005.
This seems like welcome news, but a deeper look at the belated improvement in these numbers - more than five years after the end of the last recession - underscores how the gains from economic growth have failed to benefit most of the population.
The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty - 5 million more than six years before, when the poverty rate fell to 11.3 percent.
What is perhaps most disturbing is that it appears this is as good as it's going to get. Sputtering under the weight of the credit crisis and the associated drop in the housing market, the economic expansion that started in 2001 looks like it might enter history with the dubious distinction of being the only sustained expansion on record in which the incomes of typical American households never reached the peak of the previous cycle.
It seems that ordinary working families are going to have to wait - at the very minimum - until the next cycle to make up the losses they suffered in this one. There's no guarantee they will.
The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains. The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.
This suggests that when household incomes rose, it was because more members of the household went to work, not because anybody got a bigger paycheck. The median income of working-age households, those headed by somebody younger than 65, remained more than 2 percent lower than in 2001, the year of the recession.
Overall, the new data on incomes and poverty mesh consistently with the pattern of the last five years, in which the spoils of the nation's economic growth have flowed almost exclusively to the wealthy and the extremely wealthy, leaving little for everybody else.
Standard measures of inequality did not increase last year, according to the new census data. But over a longer period, the trend becomes crystal clear: The only group for which earnings in 2006 exceeded those of 2000 were the households in the top 5 percent of the earnings distribution. For everybody else, they were lower.
This stilted distribution of rewards underscores how economic growth alone has been insufficient to provide better living standards for most American families. What are needed are policies to help spread benefits broadly - be it more progressive taxation, or policies to strengthen public education and increase access to affordable health care. Unfortunately, these policies are unlikely to come from the current White House. This administration prefers tax cuts for the lucky ones in the top 5 percent.
Market Scan
Subprime Spillover: Who's Next?
Ruthie Ackerman, 08.28.07, 6:30 PM ETThe billion dollar question on Wall Street these days is: Which companies will get swept away next in the subprime spillover?
As the financial sector attempts to dust itself off from its run-in with the subprime mortgage industry, investors are left wondering just how widespread the fallout is and which sectors will be impacted. ....
Al Goldman, chief investment officer at AG Edwards, said that if the United States is going into a recession and if the debt market is going to collapse then all firms will have problems; although those that live on their debt are at the most risk. But, Goldman says, he doesn’t see that as a valid risk since the country is not in a recession and the debt market hasn’t collapsed.
But Peter Dunay, investment strategist with Leeb Capital Management, was more pessimistic. “It’s not just the subprime real estate bonds that are not wanted anymore,” Dunay said. “Any low-quality bonds are being shunned by the Street.”
That means that companies outside the mortgage or finance industries that may not have strong earnings will find their cost of borrowing going up. If a company wanted to be an acquisition target, Dunay said, higher interest expenses make them less attractive targets.
08-29-2007, 01:41 PM
#3
Gets Weekends Off
Joined APC: Oct 2005
Position: 737 Right
Posts: 951
Originally Posted by robthree
Ok people, here are 6 articles supporting the idea that the inevitable recession is in the near term...
However, increasing energy prices and instability in the housing market have historically been indicators of slower economic growth.
08-29-2007, 03:56 PM
#7
Gets Weekends Off
Joined APC: Mar 2006
Position: Cessna 152 Captain
Posts: 695
Originally Posted by robthree
Ok people, here are 6 articles supporting the idea that the inevitable recession is in the near term... what does this mean for the airline industry? Hiring freeze? Mass furloughs? Mesa China becoming the employer of choice? Saabrooski getting dumped by his g/f & going to work for Skyhigh?
Discuss.
Summers: Recession threat worst since 9/11
By Bloomberg News | August 27, 2007
WASHINGTON -- Former Treasury Secretary Lawrence Summers said the threat of a recession in the United States is the greatest since the Sept. 11, 2001, terrorist attacks.
"I do not think we yet would have a basis for making a prediction that there will be a recession, but I will say that the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11," Summers said yesterday on ABC's "This Week" program.
Summers, who served under President Bill Clinton, said it would be "premature to judge this [subprime mortgage] crisis over," in part because "we can't yet know that there aren't more shoes to drop in the financial area."
Williams-Sonoma Profit Falls as Retailer Cuts Prices
By Cotten Timberlake
Aug. 29 (Bloomberg) -- Williams-Sonoma Inc., the biggest gourmet-cookware retailer in the U.S., said second-quarter profit fell 27 percent after it reduced prices on Pottery Barn home furnishings amid the worst housing recession in 16 years.
What are the major concerns on the Street today? Market analysts are starting to pronounce “recession,” that nasty “R” word once again. But most are saying that the US economy is going to avoid it for now. [edit]
But we do not hear much about the following:
The Fed relies mostly on lagging economic indicators and there is a risk that it will not drop the fed funds rate fast enough to prevent a recession. True, the Fed has lowered the discount rate in an attempt to restore confidence in the financial system. Yet, that does nothing to help the hurting consumer. The Fed is now behind the curve and the fed funds futures are predicting an immediate rate cut. As the stock market recovers, the Fed will feel less compelled to lower rates in a hurry. But it is a dangerous game to play. This is why a big rebound in stocks could be a setup for a large leg down in the coming months.
The fact that the global economy is strong now is not a good enough reason to say that a recession can be avoided. A strong economy now means we are at the top of a business cycle and there is a higher downside rather than an upside risk.
While most of the focus is on the financial sector, the consumer is starting to feel the pain from depreciating house prices. Lenders are being more selective and mortgage rates are rising. So far, the Fed has done nothing to help the consumers who make up 70 percent of the GDP, and it is questionable whether it can.
The fact remains that the American consumer is much more sensitive to the decline in the housing market than in the stock market. Low mortgage rates and rising property values helped keep the 2001 recession relatively shallow and painless despite the crashing stock market. The coming recession may prove to be much more difficult to weather. Consumers have lost their source of cash from refinancing. Many will now have much higher mortgage payments as a record number of ARMs get readjusted at the end of 2007 and in 2008. As a result, as many as 2 million foreclosures could occur in the near future.
Bernanke must avert a recession
Ben S. Bernanke, who became chairman of the Federal Reserve Board on Feb. 1, 2006, faces the biggest test of his leadership in the form of the credit crunch that has emerged from overzealous lending in the sub prime mortgage market. These conditions arose when credit was abundant after Sept. 11, 2001.
This should not have been a surprise. Adjustable rate mortgages were being sold at very low interest rates to many borrowers with no down payment, meaning they eventually had to be refinanced at higher rates that would increase future monthly payments. Meanwhile, home prices fell for those who bought at the peak of the sales trend in 2005. The result: Many homeowners had to come up with the difference between the current value of their homes and the originally priced mortgage. That left as many as 7 million home owners facing upfront payments of $20,000 to $50,000, plus bigger monthly payments because of higher interest rates for new mortgages that were replacing the adjustable ones. [edit]
Further delays by the Fed to accept the market signals and a decision to await the economy data that come with lags raises the odds of a recession.
A sobering census report
Wednesday, August 29, 2007
The economic party is winding down and most working Americans never even got near the punch bowl.
The Census Bureau reported Tuesday that median household income rose 0.7 percent last year - it's second annual increase in a row- to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005.
This seems like welcome news, but a deeper look at the belated improvement in these numbers - more than five years after the end of the last recession - underscores how the gains from economic growth have failed to benefit most of the population.
The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty - 5 million more than six years before, when the poverty rate fell to 11.3 percent.
What is perhaps most disturbing is that it appears this is as good as it's going to get. Sputtering under the weight of the credit crisis and the associated drop in the housing market, the economic expansion that started in 2001 looks like it might enter history with the dubious distinction of being the only sustained expansion on record in which the incomes of typical American households never reached the peak of the previous cycle.
It seems that ordinary working families are going to have to wait - at the very minimum - until the next cycle to make up the losses they suffered in this one. There's no guarantee they will.
The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains. The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.
This suggests that when household incomes rose, it was because more members of the household went to work, not because anybody got a bigger paycheck. The median income of working-age households, those headed by somebody younger than 65, remained more than 2 percent lower than in 2001, the year of the recession.
Overall, the new data on incomes and poverty mesh consistently with the pattern of the last five years, in which the spoils of the nation's economic growth have flowed almost exclusively to the wealthy and the extremely wealthy, leaving little for everybody else.
Standard measures of inequality did not increase last year, according to the new census data. But over a longer period, the trend becomes crystal clear: The only group for which earnings in 2006 exceeded those of 2000 were the households in the top 5 percent of the earnings distribution. For everybody else, they were lower.
This stilted distribution of rewards underscores how economic growth alone has been insufficient to provide better living standards for most American families. What are needed are policies to help spread benefits broadly - be it more progressive taxation, or policies to strengthen public education and increase access to affordable health care. Unfortunately, these policies are unlikely to come from the current White House. This administration prefers tax cuts for the lucky ones in the top 5 percent.
Market Scan
Subprime Spillover: Who's Next?
Ruthie Ackerman, 08.28.07, 6:30 PM ETThe billion dollar question on Wall Street these days is: Which companies will get swept away next in the subprime spillover?
As the financial sector attempts to dust itself off from its run-in with the subprime mortgage industry, investors are left wondering just how widespread the fallout is and which sectors will be impacted. ....
Al Goldman, chief investment officer at AG Edwards, said that if the United States is going into a recession and if the debt market is going to collapse then all firms will have problems; although those that live on their debt are at the most risk. But, Goldman says, he doesn’t see that as a valid risk since the country is not in a recession and the debt market hasn’t collapsed.
But Peter Dunay, investment strategist with Leeb Capital Management, was more pessimistic. “It’s not just the subprime real estate bonds that are not wanted anymore,” Dunay said. “Any low-quality bonds are being shunned by the Street.”
That means that companies outside the mortgage or finance industries that may not have strong earnings will find their cost of borrowing going up. If a company wanted to be an acquisition target, Dunay said, higher interest expenses make them less attractive targets.
Discuss.
Summers: Recession threat worst since 9/11
By Bloomberg News | August 27, 2007
WASHINGTON -- Former Treasury Secretary Lawrence Summers said the threat of a recession in the United States is the greatest since the Sept. 11, 2001, terrorist attacks.
"I do not think we yet would have a basis for making a prediction that there will be a recession, but I will say that the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11," Summers said yesterday on ABC's "This Week" program.
Summers, who served under President Bill Clinton, said it would be "premature to judge this [subprime mortgage] crisis over," in part because "we can't yet know that there aren't more shoes to drop in the financial area."
Williams-Sonoma Profit Falls as Retailer Cuts Prices
By Cotten Timberlake
Aug. 29 (Bloomberg) -- Williams-Sonoma Inc., the biggest gourmet-cookware retailer in the U.S., said second-quarter profit fell 27 percent after it reduced prices on Pottery Barn home furnishings amid the worst housing recession in 16 years.
What the "R" Word Brings to Gold
What are the major concerns on the Street today? Market analysts are starting to pronounce “recession,” that nasty “R” word once again. But most are saying that the US economy is going to avoid it for now. [edit]
But we do not hear much about the following:
The Fed relies mostly on lagging economic indicators and there is a risk that it will not drop the fed funds rate fast enough to prevent a recession. True, the Fed has lowered the discount rate in an attempt to restore confidence in the financial system. Yet, that does nothing to help the hurting consumer. The Fed is now behind the curve and the fed funds futures are predicting an immediate rate cut. As the stock market recovers, the Fed will feel less compelled to lower rates in a hurry. But it is a dangerous game to play. This is why a big rebound in stocks could be a setup for a large leg down in the coming months.
The fact that the global economy is strong now is not a good enough reason to say that a recession can be avoided. A strong economy now means we are at the top of a business cycle and there is a higher downside rather than an upside risk.
While most of the focus is on the financial sector, the consumer is starting to feel the pain from depreciating house prices. Lenders are being more selective and mortgage rates are rising. So far, the Fed has done nothing to help the consumers who make up 70 percent of the GDP, and it is questionable whether it can.
The fact remains that the American consumer is much more sensitive to the decline in the housing market than in the stock market. Low mortgage rates and rising property values helped keep the 2001 recession relatively shallow and painless despite the crashing stock market. The coming recession may prove to be much more difficult to weather. Consumers have lost their source of cash from refinancing. Many will now have much higher mortgage payments as a record number of ARMs get readjusted at the end of 2007 and in 2008. As a result, as many as 2 million foreclosures could occur in the near future.
Bernanke must avert a recession
Ben S. Bernanke, who became chairman of the Federal Reserve Board on Feb. 1, 2006, faces the biggest test of his leadership in the form of the credit crunch that has emerged from overzealous lending in the sub prime mortgage market. These conditions arose when credit was abundant after Sept. 11, 2001.
This should not have been a surprise. Adjustable rate mortgages were being sold at very low interest rates to many borrowers with no down payment, meaning they eventually had to be refinanced at higher rates that would increase future monthly payments. Meanwhile, home prices fell for those who bought at the peak of the sales trend in 2005. The result: Many homeowners had to come up with the difference between the current value of their homes and the originally priced mortgage. That left as many as 7 million home owners facing upfront payments of $20,000 to $50,000, plus bigger monthly payments because of higher interest rates for new mortgages that were replacing the adjustable ones. [edit]
Further delays by the Fed to accept the market signals and a decision to await the economy data that come with lags raises the odds of a recession.
A sobering census report
Wednesday, August 29, 2007
The economic party is winding down and most working Americans never even got near the punch bowl.
The Census Bureau reported Tuesday that median household income rose 0.7 percent last year - it's second annual increase in a row- to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005.
This seems like welcome news, but a deeper look at the belated improvement in these numbers - more than five years after the end of the last recession - underscores how the gains from economic growth have failed to benefit most of the population.
The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty - 5 million more than six years before, when the poverty rate fell to 11.3 percent.
What is perhaps most disturbing is that it appears this is as good as it's going to get. Sputtering under the weight of the credit crisis and the associated drop in the housing market, the economic expansion that started in 2001 looks like it might enter history with the dubious distinction of being the only sustained expansion on record in which the incomes of typical American households never reached the peak of the previous cycle.
It seems that ordinary working families are going to have to wait - at the very minimum - until the next cycle to make up the losses they suffered in this one. There's no guarantee they will.
The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains. The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.
This suggests that when household incomes rose, it was because more members of the household went to work, not because anybody got a bigger paycheck. The median income of working-age households, those headed by somebody younger than 65, remained more than 2 percent lower than in 2001, the year of the recession.
Overall, the new data on incomes and poverty mesh consistently with the pattern of the last five years, in which the spoils of the nation's economic growth have flowed almost exclusively to the wealthy and the extremely wealthy, leaving little for everybody else.
Standard measures of inequality did not increase last year, according to the new census data. But over a longer period, the trend becomes crystal clear: The only group for which earnings in 2006 exceeded those of 2000 were the households in the top 5 percent of the earnings distribution. For everybody else, they were lower.
This stilted distribution of rewards underscores how economic growth alone has been insufficient to provide better living standards for most American families. What are needed are policies to help spread benefits broadly - be it more progressive taxation, or policies to strengthen public education and increase access to affordable health care. Unfortunately, these policies are unlikely to come from the current White House. This administration prefers tax cuts for the lucky ones in the top 5 percent.
Market Scan
Subprime Spillover: Who's Next?
Ruthie Ackerman, 08.28.07, 6:30 PM ETThe billion dollar question on Wall Street these days is: Which companies will get swept away next in the subprime spillover?
As the financial sector attempts to dust itself off from its run-in with the subprime mortgage industry, investors are left wondering just how widespread the fallout is and which sectors will be impacted. ....
Al Goldman, chief investment officer at AG Edwards, said that if the United States is going into a recession and if the debt market is going to collapse then all firms will have problems; although those that live on their debt are at the most risk. But, Goldman says, he doesn’t see that as a valid risk since the country is not in a recession and the debt market hasn’t collapsed.
But Peter Dunay, investment strategist with Leeb Capital Management, was more pessimistic. “It’s not just the subprime real estate bonds that are not wanted anymore,” Dunay said. “Any low-quality bonds are being shunned by the Street.”
That means that companies outside the mortgage or finance industries that may not have strong earnings will find their cost of borrowing going up. If a company wanted to be an acquisition target, Dunay said, higher interest expenses make them less attractive targets.
The Sky is Falling the Sky is Falling.....
08-30-2007, 05:06 AM
#9
Self Employed.
Joined APC: May 2005
Position: Corporate Pilot
Posts: 7,119
Recession
I am sure that we all will live through it but the recession of 1991 was devastating.
The legacies are just now beginning to recover. A recession now would be a death blow to more than one carrier. Management again would have grounds to ask for more pay cuts.
Most here will have their dreams put on hold or permanently discounted.
SkyHigh
The legacies are just now beginning to recover. A recession now would be a death blow to more than one carrier. Management again would have grounds to ask for more pay cuts.
Most here will have their dreams put on hold or permanently discounted.
SkyHigh
08-30-2007, 05:13 AM
#10
Self Employed.
Joined APC: May 2005
Position: Corporate Pilot
Posts: 7,119
Set Back
Originally Posted by ebl14
I'm selling everything and moving into a cave where it will be safe when anarchy takes over and the nations economy falls through the basement. This is common news... ups and downs... we will be fine.
A thing like this can set a guy back five years. Pilot careers live in cycles. Time it wrong and you are out of sync. Get laid off and you could be an old timer before you get back to where you were and that can be a career killer.
Skyhigh
