WICHITA — American homebuyers will save $11.5 billion over five years because of the government intervention in the mortgage market to lower interest rates, according to First American CoreLogic.
WICHITA — One of the big unknowns in whether we really are in a recovery has been consumer spending. Consumers have been laid off or scared of losing their jobs or trying madly to pay off their bills for about a year. It makes for some pretty conservative spending habits.
That’s why this August report on chain store sales from the International Council of Shopping Centers is good news. It’s down from last August, but only 2 percent, better than the companies expected. It suggests that consumers are feeling better about life and are willing to spend. That supports retailers, which supports manufacturers. Consumer spending is 70 percent of the US economy.
Of course, this is fragile, given the massive amounts of consumer, corporate and national debt that must still be paid down. Some predict the recovery will fall back into recession next year. But, for now, let’s embrace the encouraging news.
WICHITA — Worker productivity rose 6.6 percent in the second quarter because companies cut their work forces a lot faster than their sales fell. Apparently, companies didn’t wait to see how bad this recession would be and just started swinging their axes, leaving their remaining workers to manage somehow. That’s different than in the past when companies laid off workers only after sales started falling. That’s why jobs and the unemployment rates are traditionally considered a lagging indicator — the last thing to go down in a recession and the last thing to snap back.
That’s bad in the short run. Obviously, millions are unemployed, and tens of millions more are having to work harder to compensate. For companies, there’s rising profits from running extremely lean (and furloughing and cutting salaries, eliminating the 401(k) contribution, etc.)
But there is a possible silver lining. Because companies cut quickly and deeply, it may mean they rehire more quickly than they have in the past. Companies may not be able to have that “jobless recovery” because they’re already so thin.
WICHITA — Check out this ranking from U.S. News & World Report. It puts Wichita in the top 10 in the nation for jobs — Hah!
Every few years Wichita sucks in a bunch of people who put together those national rankings. They sit in some office in Washington or New York and look at employment rates around the country and what kind of money people make, etc. and Wichita looks darn good. What they don’t fully grasp is that our economy goes up and down about a year after the nation as a whole. If they looked at numbers even 6 months old, Wichita still looks OK. Today, with 9.9 percent unemployment, Wichita doesn’t look so hot.
On the other hand, when Wichita shows up 230th out of 250 on the 2011 list, don’t feel bad about the Peerless Princess of the Plains. Our time is coming.
WICHITA — I was shocked when I saw the July unemployment numbers for Wichita. It was 9.9 percent for the metro area, 10.2 for Sedgwick County and 11 percent for Wichita city. That’s up 1.4 percentage points from June.
Will it go down? Very likely, but it doesn’t mean the economy is improving. Unemployment rates are calculated two ways: seasonally adjusted means statisticians have taken out the regular yearly ups and downs to look at the underlying trend; and not-seasonally adjusted, which is the actual rate. Kansas had a 7.4 percent seasonally adjusted rate in July and a 7.7 not-seasonally adjusted rate. The U.S. rate (9.4 percent) is always seasonally adjusted.
The state figures the Wichita rate as not-seasonally adjusted, which means July is almost always the highest rate of the year because some workers are regularly laid off in July and rehired in August and September. Just because the rate may go down in September, doesn’t mean the city’s economy is creating new jobs again.
And, Wichita has a history of taking more than a year to hit bottom as the downturn ripples through the service economy. That may mean that unemployment rate in July 2010 will be over 9.9 percent.
WICHITA — Had a chat with Malcolm Harris this morning. He’s a professor at Friends and an economist. He had some encouraging speculation.
He doesn’t think the U.S. economy will go back into recession next year, as a lot of people think, despite remaining weak. This is called a W-shaped recession or a double dip. We had one in 1979-82.
Harris said it takes a shock to push the economy, even a weak one, into recession. A shock is any kind of sudden disaster. The subprime explosion is the latest.
On the other hand, he joked, he didn’t foresee the 9/11 attacks and the anthrax scare in 2001 when he was forecasting for the US Postal Service, so there’s no telling.
A lot has been written in recent months about how American consumer culture is changing. People are willingly or unwillingly weaning themselves off debt and embracing a Depression-style frugality. These writers imply that pretty soon we’ll be saving broken bits of soap to do our dishes by hand. Their main evidence is the sharp increase in the savings rate from less than 1.5 percent in the 4th quarter to 5.2 in the second quarter.
At this point, it’s hype. The psychology hasn’t changed. People may be running scared, but I don’t think they’ve changed their basic outlook on life. The Great Depression lasted a decade, followed by another 5 years of war in which people had to scrimp. This “new era” of enforced frugality has lasted, what, six months following 30 years of consumer borrowing and spending. People don’t change their basic outlook on life in six months. Look at what happened in the stock market. Financial pundits said many would never get back in the stock market. Well, guess what. Once it turned around, people jumped in again, despite the signs that this rally can’t last. People saw the decline as a buying opportunity.
As far as consumer spending. Check out this analysis from the Center for American Progress:
If we dig deeper into the figures, however, we see that the drop in spending—the increase in the saving rate—appears to be largely a result of lower energy prices and less spending on cars, which are likely caused by fewer people having to drive themselves to work and less access to consumer credit.
In other words, people aren’t voluntarily saving any more than they were.
It’s possible this really is the start of a new era. This view holds that consumers will be forced to cut spending for years in order to pay down trillions in credit cards, houses, cars, etc. This is the so-called “Great Deleveraging.” But it would have to go on for years, decades even, and shape a new generation before it works its way into the national psyche.
WICHITA – Are you taking your lunch to work, these days? It’s one of the hottest workplace trends as people economize, as shown in this survey by the National Foundation for Credit Counseling. Here’s the survey with that and other questions:
May question: To help trim costs, I have started doing the following
o Taking lunch to work = 43%
o Using public transportations more = 2%
o Planning a “staycation” = 6%
o Cutting back on expensive evenings out = 36%
o Nothing yet, but I know I need to start soon = 12%
• June Question: This summer you plan to
o Take a vacation spending the usual amount = 3%
o Take a vacation, but spend less = 13%
o Stay at home, but take advantage of local events = 19%
o No money for a vacation of any kind this year = 64%
• July Question: The one thing that would make me feel more financially secure would be to
o Have more money in savings = 11%
o Have less debt = 73%
o Have job security = 4%
o Have more control over my finances = 13%
WICHITA — The House just adopted a new measure to put a lid on huge corporate pay packages. That may play well to most people and in Congress, but is ultimately besides the point. Regulators already had the power to curb the practices that led to the housing and financial crises. It was simply a matter of how vigorously those regulators enforced the rules, which is really a matter of the political climate and who runs the White House. In other words, while the Dems are in, there will be heavy regulation. When the Republicans get back in — and they will — that regulation will likely ease off.
This Bloomberg story suggests that the credit crunch is about over as banks regain their confidence to lend to each other. The so-called TED spread is the difference between government and corporate (LIBOR) interest rates. The narrower the gap, the more confident banks are in lending to each other, and then to other companies.
That’s great news. It was the credit crunch that made this recession deeper than average by cutting off credit to companies that needed it to operate. As the cost of lending comes down and the ease of lending goes up, it will eventually lead to the rise in the amount of lending. That is a key first step for the economy to start growing again.
WICHITA — The nation lost 467,000 jobs in June, according to the numbers released today. That’s an astounding number, but less than earlier this year. It pushed the unemployment rate up from 9.4 in May to 9.5 percent. That, clearly, is a slowing in the rate and appears to be confirm that the rate is close to peaking in the next few months near 10 percent.
I was feeling comforted by this, until I read something from the Economic Policy Institute, a liberal economic thinktank.
The entire growth in jobs over the last nine years has now been wiped out – the economy currently has fewer jobs than it had in May 2000. The labor force, however, has grown by 12.5 million workers since then. “This is the only recession since the Great Depression to wipe out all jobs growth from the previous business cycle, a devastating benchmark for the workers of this country and a testament to both the enormity of the current crisis and to the extreme weakness of jobs growth from 2000-2007,” said EPI economist Heidi Shierholz.
First it was construction, then financial, then manufacturing, then services and retail. Now its government and non-profit workers who depend on taxes and gifts from the other sectors that are seeing rising layoffs. These are the teachers, police and social workers who pick up the pieces when the rest of society goes blooey.
The good news is that overall, forecasters are starting to agree that layoffs are slowing down and we are getting close to the bottom on employment. The bad news is it could be a while before companies start hiring again. From John Challenger, CEO of outplacement firm Challenger, Gray & Christmas.
“It could be several more months before we see hiring make a comeback, but it appears that many employers have reached the staffing levels they need to make it through the recession.”