Job Losses to Increase, GDP to Decrease and Bankruptcies on the Rise
Sounds like RECOVERY to me! We haven’t even seen the affects from all the spending like increased prices, interest rates and inflation. Couple all of this with the liberal governors and mayors who are planning on increasing taxes during this economic contraction as well as other economic issues and distortions in the market such as the credit market, treasury receipts and quants, that have not seen their bottoms yet – and you are making one heck of a perfect storm!
The number of U.S. businesses and individuals declaring bankruptcy is rising with a vengeance amid the recession, despite a three-year-old federal law that made it much tougher for Americans to escape their debts, an Associated Press analysis found.
“There’s no end in sight,” said bankruptcy lawyer Bryan Elliott of Hickory, N.C., who is working seven days a week and scheduling prospective clients a month in advance. “To be doing this well and having this much business, it is depressing. It’s not a laugh-a-minute job.”
Nearly 1.2 million debtors filed for bankruptcy in the past 12 months, according to federal court records collected and analyzed by the AP. Last month, 130,831 sought bankruptcy protection – an increase of 46 percent over March 2008 and 81 percent over the same month in 2007.
Bob Lawless, a professor at the University of Illinois College of Law, said bankruptcies could reach 1.5 million this year and level off at 1.6 million next year – around the same time economists expect an economic recovery to begin.
Which gets into the credit market crisis that has yet to hit us, since the majority of individuals and businesses have spent beyond their means and maxed our their credit. Those who cannot pay back their debts are filing for bankruptcy and the banks and financial credit institutions are left holding the bag and cannot recover all of the money they loaned.
Then you have the new report that more people are becoming deliquent on their income taxes this year than years in the past. To me, this was an obvious occurrence, bound to happen due to the economic downturn and record high unemployment in the last couple of decades. Income taxes and tax returns are some of the greatest sources of revenue for the government, which is why I didn’t want people jumping on “this is a bull market rally” band wagon. There is still some dreadful news that will be reported and will not help the market.
The head of the White House Council of Economic Advisers says people should expect more job losses in the coming months.
But at the same time, Christina Romer said Tuesday that administration officials also are detecting “small little signs that maybe some parts of the economy are stabilizing.”
Romer declined to say specifically on NBC’s “Today” show how long she thought the current recession would last. But she said she believes administration officials “are being very pragmatic.”
She said, “We’ve got several more months of job loss, so we don’t really want to lead people to believe that spring is right here for the economy.”
Unemployment rates are lagging indicators of market conditions; however, stating that you expect more job losses for several more months is not the same thing as just a simple lag of a month or two that may see a slight rate increase.
“We know the economy’s still sick. We know we’ve got several more months of job loss, for example. We know that the numbers on GDP are almost surely going to be very bad for this quarter and next,” Romer, the head of the White House Council of Economic Advisers, said on NBC’s “The Today Show.”
The U.S. economy lost 663,000 jobs last month, driving the unemployment rate to a 25-year high of 8.5 percent. Economists polled by Reuters expect the unemployment rate to rise to 9.8 percent a year from now.
Economists polled by Reuters expect GDP to contract by 5.0 percent in the first quarter of 2009 and 2 percent in the second quarter before edging into positive growth toward the end of the year.
I’m not so sure about that positive growth this year and those rose-colored glasses some of these “economists” have on. If you are going to increase taxes and spend, spend, spend – there is more to the story than what they are imagining it to be, especially if China is slowing up on buying our debt and treasury receipts are way down.
New York Close to Bankruptcy
Cue the flashbacks of New York City in 1975, when it had also faced bankruptcy. This is not the first time the big metropolis has been extremely close to going under. However, the playbook was already set in how to fix and deal with the bankruptcy situation back then. Many argue that this situation is different and more dire due to the number of outside factors and complex securities that affect the markets today.
Ed Koch was ushered in as mayor in 1977 after Abe Beame went to then President, Gerald Ford, begging for a handout/bailout for the city. The famous headline from that time was Gerald Ford telling New York City to “Drop Dead.” Ford was a fiscal conservative who did not believe in bailing out cities, companies and the like.
Ed Koch is credited for the sound financial practices that were established that would enforce the city to follow the GAAP and balance its books/budget on an annual basis. So under law, New York City cannot be running deficits.
So far, Mayor Bloomberg is following the playbook to a “T,” but he still has a ways to go to ensure that bankruptcy does not become an option for the city. It is also important to note that Mayor Bloomberg is only being paid a salary of $1.00/year – something that no other mayor would probably accept.
Sweeping layoffs of government employees are needed to prevent New York going bankrupt, Mayor Michael Bloomberg said Thursday.
Bloomberg, who is in tense negotiations with municipal workers’ unions, said an extra 7,000 jobs would have to go unless major reductions are made in employee benefits.
“We cannot continue. Our pension costs and health care costs for our employees are going to bankrupt this city,” he said in comments broadcast on NY1 television.
Bloomberg, running for a third mayoral term at the end of this year, said that proposals from unions so far were “nowhere near what is adequate.”
The possible job cuts, first announced Wednesday, would be on top of 1,300 already proposed and another 8,000 that could be axed through attrition.
Department heads have until Monday to propose cuts and Bloomberg must present the city budget by the end of the month. The city is barred by law from running deficits.
The recession and the Wall Street crisis have knocked a huge hole in city finances that traditionally relied heavily on taxes from financial companies.
The budget office on Wednesday said that 7,000 extra job cuts would allow the city to cut a further 350 million dollars in expenditure.
Another One Bites the Dust… Newspapers File for Bankruptcy
The Sun-Times Media Group, owner of the Chicago Sun-Times and numerous suburban newspapers, filed for Chapter 11 bankruptcy Friday morning, just a few months after rival newspaper titan Tribune Company did the same thing.
As CBS 2′s Joanie Lum reports, the filing didn’t come as a surprise for many employees at the paper. The only surprise was that the Sun-Times filed for bankruptcy after the Tribune.
On Tuesday morning, the staff of the Sun-Times was in a meeting with the bosses in the Holiday Inn located above their headquarters at 354 N. Orleans St., to learn how bankruptcy protection will affect the newspaper and its readers.
The Chicago Sun-Times returned to it’s liberal-leaning stance a couple years back (in 2007) and the readership has taken a nose-dive. That, plus the fact that almost everything in internet based these days and the current recession, does not help the outdated newsprint as a valid form of media.
Good riddance… learn to start reporting the facts objectively and maybe people will read your paper!
