IF ANY more evidence is needed that America’s economy is perilously close to recession, it was delivered this week. On Friday March 7th the Bureau of Labour Statistics announced that the economy lost 63,000 non-farm jobs in February, following a smaller decline in employment in January. Even with all the bearish talk recently, these results were unexpectedly bad; forecasters had projected a small increase, not the largest drop in five years. The unemployment rate edged down from 4.9% to 4.8%, but only because there were fewer unemployed people actively searching for work.
On the same day the Federal Reserve announced that it would make additional loans of up to $100 billion available to prevent renewed strains in money markets from hurting the economy. The question for many is now turning from whether a recession is on the way to how long and how deep it will be.
The worst jobs news is still in the house-building sector, which is reeling from the effects of plummeting home prices. Since an industry high point in 2006 some 209,000 trade jobs (such as plumbers and electricians) and 137,000 construction jobs have melted away. The Mortgage Bankers Association reported on Thursday that foreclosures are up by 71% from a year ago.
Mortgage-delinquency rates hit the highest point since 1985. And rates of delinquency among prime borrowers also increased as the crisis shifts further beyond sub-prime borrowing to affect safer loans. Many Americans are seeing their home value sink below the size of their mortgages, giving them an incentive to ditch their property and stack up higher losses for banks. That would push prices down even further and rattle already teetering financial markets.
Just in time for a national election! Wow, the Dems must be beside themselves with excitement as they have something negative they can highlight!
Brian
I saw a piece on CNN earlier today about Europeans, armed with strong currency, buying houses in Florida, Texas and California, paying cash for them, and stimulating the local economies of the communities in which they are buying.