We soon should know whether we're double-dipping into recession or not

Wash Post:

The recovery faces a crucial test over the next couple of months: Either it will pick up vital momentum from increased consumer spending and investment or stall out, dipping into a period of anemic growth -- or perhaps even another recession.

Forecasters knew this inflection point would arrive, a moment when consumers and businesses must take over for government stimulus spending and the rebuilding of inventories.

On Friday, the government will offer crucial evidence when it reports on second-quarter economic growth. This will be the first in a series of indicators in the coming weeks that could help answer whether the economy has achieved cruising speed, in particular whether the private sector is growing fast enough to put unemployed Americans back to work. Forecasters are expecting that gross domestic product rose at a rate of 2 to 2.5 percent rate in the April-through-June quarter, which would be too slow to drive down the jobless rate.

Just Wednesday, the government announced a surprising 1 percent drop in June orders for durable goods and a compilation of anecdotal reports from around the country by the Federal Reserve showed a recovery that is increasingly uneven. This fit into the pattern of recent economic indicators showing that the transition to a self-sustaining recovery has been rocky.

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Recession now arriving in US courts

And it's probably not going to ease up any time soon. The story focuses the most on the state of New York though other states are seeing comparable increases as well. NY Times:

Contract disputes statewide in 2009 are projected to be up 9 percent from the year before. Statewide home foreclosure filings increased 17 percent, to 48,127 filings. Cases involving charges like assault by family members were up 18 percent statewide. While serious crime remains low, misdemeanor charges in New York City were up 7 percent and lesser violations were up 18 percent in 2009.

Judges and lawyers say the tales behind any number of cases, including low-level offenses like turnstile jumping and petty theft, are often a barometer of bad times. And they said that the data showed that courts nationally would be working through the recession’s consequences for years, much as they did with the flood of cases stemming from the crack cocaine epidemic of the 1980s, even after the epidemic had slowed.

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Housing data suggests bumpy times ahead

Some are suggesting the housing data is pointing towards a double dip recession. As the tax credit disappears, so may the housing market.

Construction of homes unexpectedly plunged last month to its lowest point since April, the Commerce Department said Wednesday. The weak figures show that builders fear there aren't enough buyers to soak up the glut of unsold homes already on the market — a supply magnified by record-high foreclosures.

They also illustrate how much the fledgling recovery depends on government aid. Builders held back in part because of uncertainty in October about whether Congress would extend a tax credit for homebuyers. Earlier this month, lawmakers renewed the credit and extended it to more buyers.

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Top UK CEO pay barely scratched by recession

And remember, CEO's in the UK and Europe are paid much less than US executives. Despite the stock free fall in the market (which has brutalized retirement plans) corporate leaders are hardly sharing in the pain. Bonuses have come down a bit though offsets in salary increases have made the differences hard to detect. The bankers have (fairly) received the bulk of public anger for excessive pay but it doesn't take long to see too many other unacceptable examples. The Independent:

The typical boss of a FTSE 100 company pocketed a bonus of £502,000 for the financial year to April, a survey by Incomes Data Services reveals today. Though the figure was 29 per cent lower than the year before – the first time in a decade that chief executives' bonuses have fallen – IDS said the size of the pay-outs would still surprise many people.

It also pointed out that at many companies, chief executives were compensated for smaller bonus payments by much higher basic salaries, with the typical boss given a 7.4 per cent rise. As a result, the average FTSE 100 director's total remuneration package last year was just 1.5 per cent lower. Chief executives are still earning just as much as they did in 2006, when the economy was still strong.

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Wealthy Germans want to pay more taxes to help recovery

Let's just say you don't see petitions like this ever day. They are taking their petition which has been signed by a few dozen wealthy Germans and will deliver it to Chancellor Angela Merkel. Whether you agree or disagree, it's a rare example of unity of a nation to pull through a tough situation. You really have to read the whole story because it's really amazing. BBC:

The group say the financial crisis is leading to an increase in unemployment, poverty and social inequality.

Simply donating money to deal with the problems is not enough, they want a change in the whole approach.

"The path out of the crisis must be paved with massive investment in ecology, education and social justice," they say in the petition.

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7,000 a day running out of unemployment benefits

At least the bank bonuses are flowing. Maybe some are going retro in DC and think that trickle down economics is back in style. Looking at how bizarre many are treating the banks (and allowing them to go back to their old ways) anything is possible. For those not working in the upper echelons of banking, life is different.

Another day, another 7,000 people run out of unemployment benefits.

One month after the House passed a bill extending unemployment benefits, the issue is still being debated in the Senate.

Democratic leaders in the Senate introduced a bill two weeks ago to lengthen benefits in all states by 14 weeks. Those that live in states with unemployment greater than 8.5% would receive an additional six weeks.

Meanwhile, Orrin Hatch wants everyone to focus on college football. How clueless could he be? Read More......

Hopefully this is not in our future

The UK left and right are competing with each other to see who can cut more. It may be necessary to avoid even worse financial problems (along with much higher taxes) but it's ugly. The left is promoting a freeze on pay for government workers while the right wants to raise the age of retirement. Meanwhile, the bankers are still doing just fine. What a fair system. For the US, it's going to be very difficult not to start having the same discussions sooner or later, though higher taxes surely will be kicked around soon enough. Well, definitely sooner than asking Wall Street to pay its fair share. Read More......

Layoffs stabilizing but few new jobs

As with many of the jobs updates lately, it's not the best of news but it could be much worse. It's doubtful much will change in 2009 though perhaps in 2010 we will start to see more positive change. Reuters:

Employers have sharply cut back on layoffs but hiring has yet to take off, putting a damper on domestic demand. That has left many analysts doubting the economy's recovery from its worst recession in 70 years will be sustainable once the government's various spending programs end.

The survey of 77 economists forecast employers cut 180,000 jobs in September, which would be the smallest amount for any month since August 2008. Payrolls declined 216,000 in August.

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Income gap widens during recession

Talk about redistributing wealth. The Republicans are masters of the game. What's worse are the number of Democrats who buy into this scheme. Even worse, some of them are hired to run the US economy in a Democratic administration.

The recession has hit middle-income and poor families hardest, widening the economic gap between the richest and poorest Americans as rippling job layoffs ravaged household budgets.

The wealthiest 10 percent of Americans — those making more than $138,000 each year — earned 11.4 times the roughly $12,000 made by those living near or below the poverty line in 2008, according to newly released census figures. That ratio was an increase from 11.2 in 2007 and the previous high of 11.22 in 2003.

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US airlines adding fees for international luggage

Americans could stand to travel with less luggage but still, this is a move in the wrong direction. So many of these extra fees were slapped together when the cost of fuel went through the roof and as expected, now that fuel prices are lower the fees are not going away. If anything, there are now more of them. The airlines want to nickle and dime customers to death and the routine is getting old. It's also encouraging more people to drag even more into the cabin which is going to make for even longer (and more miserable) boarding.

Squeezing more out of fewer customers is now the approach by the consultants in this industry but hopefully someone out there will eventually tap into customer anger and think about winning over customers again instead of kicking them. Finding a pricey business consultant that has an ounce of common sense might be asking for too much though.

Fees to check bags on international flights are creeping in and may be here to stay. In the past three months, all the big U.S. carriers have added $50 fees to check a second bag on flights to Europe. Delta and Continental are charging second-bag fees for flights to Latin America, too.

We've flown this route before, with domestic bag fees. United Airlines started with a fee to check a second bag last year, and other carriers followed. The wave of international bag fees got started July 1 when Delta began charging to check a second bag between the U.S. and Europe.

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CNBC declares "Mission Accomplished" for EU economy

Uh huh. Next to Larry Kudlow, Kudlow's Mini-Me is my favorite wingnut over at CNBC. He's such an avid follower of all things Europe which is why he's now declaring EU victory over the US. See, the stimulus was a complete waste of money according to Mini-Me. Despite new polling in the US that suggests Americans are finally seeing the benefit, it didn't help at all according to CNBC. Somehow an even higher unemployment rate would have been better for Mini-Me and we all know how little the unemployment rate impacts the rest of the economy.

Turning to Europe, yes, France *technically* moved out of recession. As someone who is maybe just a little more familiar with the business world in Europe than Mini-Me, it will be a shock if the growth trend advantage continues over here. All signs on the ground point towards increasing unemployment and a very shaky 2010. Considering how many people are concerned about a double dip recession, it's strange to read about the big victory. Before anyone declares "Mission Accomplished" maybe they should pause for a moment and watch the rest of the program.

Putting aside any technical definitions this recession and its near term problems has yet to fully play out. (One could also argue that the technical terms are meaningless anyway. Americans felt the recession well before the recession technically arrived.) Mini-Me and the Republicans always love waving the banner too soon. The system over here moves much slower both going into recession and coming out of recession. It remains possible that Europe will emerge first and stronger from this recession but somehow it doesn't look likely from what I see and hear. Forget about any short term spikes and let's see how it all plays out over the next 12-36 months. If anyone wants to declare victory at that point, fine, but before then it's all a bit silly. Read More......

British royals untouchable in budget cut debate

Worthless and so damned expensive. At least everyone else who is facing cutbacks knows that everyone is in it together. Almost.

The Royal Family is to be exempt from any cuts in public spending next year when its civil list funding is settled for the next 10 years.

Although all of the major political parties are vying to demonstrate their willingness to wield the axe on public spending, MPs will be powerless to reduce the £7.9m a year paid under the civil list because of an obscure deal struck between Buckingham Palace and the Treasury in 1972 when the current legislation governing royal finances was drawn up.

Palace officials made clear earlier this summer that they are actually seeking a rise in the annual civil list payment to cover "increased costs" despite the fact that they currently have a £21m surplus in the reserves on the civil list account.

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What do pink ties, wine auctions and restaurant garbage have in common?

They are supposed to be signs of economic recovery but it sounds like a stretch. Read More......

Losses piling up for large loans at US banks

At least the banking industry is safe and sound, ready for fat bonuses. Maybe this is why there's a sudden new interest in Washington to address the severe problems in the banking industry. The banks, no doubt, have done an excellent job of convincing many in Washington that they only needed to get over the ever-so-small problems last year. The massive injection of capital helped keep money moving though too much into the pockets of bankers. The next round of pain for the banks may not be as bad as the failures last year but that situation was unique. The coming problems in the banking industry will be a major challenge to the bottom line of the banks. Plenty more pain to come, but will there ever be any consequences for the banks?

U.S. regulators say that the level of losses from syndicated loans facing banks and other financial institutions tripled to $53 billion in 2009, due to poor underwriting standards and the continuing weakness in economic conditions.

According to the Shared National Credit Program (SNC) 2009 Review, an annual inter-agency report released on Thursday, credit quality deteriorated to record levels with respect to large loans and loan commitments.

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Credit card defaults hit new record high

Predictable and not encouraging news for the banks who are also eying commercial real estate problems. Whether the gentle handling of the banks have delayed the banking pain (as some suggest) remains to be seen but it does look like an over-valued sector over time. Reuters:

The U.S. credit card charge-off rate rose to a record high in August, as more Americans lost their jobs, Moody's Investors Service said on Wednesday, in another sign consumers remain under stress.

The Moody's credit card charge-off index -- which measures credit card loans that banks do not expect to be repaid -- rose to 11.49 percent in August from 10.52 percent in July.

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Moody's: California, Florida housing recovery by 2030

Nevada and Arizona are not looking very good either. For buyers it may be OK news provided they're not in a rush to sell for a few decades. Definitely not good news for the previously high flying states. Read More......

Slow recovery, lower standard of living for UK

Just how real was the standard of living during the credit bubble years? People were living well above their means and now they're going to have to live within reality, plus pay a price for the excesses that were never there anyway. The UK is not the only country that will be facing such a problem. The Independent:

While the employers' organisation seems confident that the UK has emerged, technically, from recession in the past few months, it stressed that 2010 would be a "tough" year economically, with falling living standards and growth that would actually fall back slightly in the new year, fuelling fears that the UK could experience the much-feared "double dip" or "W-shaped" recession.

"We do worry that it is going to be weak," said the CBI's chief economist, Ian McCafferty. "As the stimulus is withdrawn it leaves the economy at risk of a further slowdown."

Next year is going to be interesting to watch for the world economy. Avoiding the double dip is not going to be easy for any country. Read More......

Bank of England, Big Oil warn on oil price shock

Oh great. This is about the last thing any of us need now so hopefully they're all completely wrong about this. However, it is rather strange to see oil prices so high during a recession. They are obviously down from the $150 high, but even around $70 sounds very excessive when looking at how deep the recession has been.

There were similar warnings from the oil industry itself yesterday. Christophe de Margerie, chief executive of the French energy giant Total, said oil is set to move back above $100 and warned that if recession-hit oil producers continue to delay investment the world faces shortages by 2015.

Mr Sentance's warning also echoes remarks from the Bank Governor, Mervyn King, last week. He described commodity prices as one of the "headwinds" facing the economy, not least because of recent growth in Asia. "Because their growth is more energy-intensive than in other parts of the world so we may see a pick-up in commodity prices," Mr King said. "[So] recovery may be more protracted than we might otherwise have thought."

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Mortgage delinquencies increasing

Not that it's much of a surprise, but still not very good news. As unemployment goes up, so goes the mortgage problems. As a first step we at least need to see an end to the bleeding. As the government plan for boosting housing (the $8000 checks for new home buyers) wears off, we could see the pain returning to the housing market.

Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.

August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.

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Greehouse gas emissions decline during global recession

Maybe that was Wall Street's secret plan all along. They're environmentalists at heart and were only thinking about saving the world. Who knew they were so thoughtful? AFP:

The unpublished IEA study found carbon emissions from burning fossil fuels had dropped significantly this year -- further than in any year in the past four decades.

Falling industrial output is largely responsible for the plunge in emissions, but other factors also played a role, including shelving plans for new coal-fired power stations because of falling demand and lack of financing.

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