U.S. Economy: Plenty More Bad News

by: Michael Panzner

Many people seem to think that U.S. markets are jittery because of fears about what developments in Europe might mean for the rest of the world. But even if there was no sovereign debt crisis, I would be hard-pressed to overstate just just how bad things are here at home. While I've posted plenty of articles detailing the dismal state of the U.S. economy from the perspective of the man in the street (not the one on Wall Street, mind you), all you need is Google, an internet connection, and a few moments of time to see that there's plenty more bad news where the rest came from. After reading the following articles, the first thing that pops into my head is: Why does what is happening overseas even matter?

"In Brutal Job Market, More Than a Million Quit Looking" (CNBC.com)

If you think the jobs situation has become pretty hopeless, you're not alone. Roughly 1.1 million workers have given up hope of finding employment.

The staggering level of "discouraged workers" as the government calls them has swelled to historic proportions in 2010, past the million barrier for the first time since the Bureau of Labor Statistics has been tracking the number.

Though a bit off its all-time high of 1.2 million recorded in February, the metric stands as perhaps the most daunting statistic of last Friday's gloomy jobs report, which showed that almost all the new employment is coming from temporary government Census jobs and not the kind that will sustain an economy.

"The fact that people are sitting down indicates just how bad the market is for some categories of people," says Peter Morici, professor at the University of Maryland's Smith School of Business and the former chief economist at the US International Trade Commission.

"Drag on Recovery: Consumer Debt-Cutting" (Wall Street Journal)

Anyone who has struggled with addiction knows recovery is a long, slow process.

So it shouldn't come as too much of a surprise that the economic rebound is moving at such a gradual pace.

Despite a vigorous bounce-back in corporate earnings and a veritable factory boom, job growth is decidedly sluggish. Gross domestic product is growing at only half of the 7% to 8% pace that typically has been seen after past deep recessions.

One reason: deleveraging. After years of bingeing on debt, U.S. households are paring back. Those not doing so by choice are often being forced, because lending standards remain tight.

The question now, both for consumer spending and growth more broadly, is how much further the process has to go.

The answer is probably a lot.

"Employers Lowballing New Hires" (Wall Street Journal)

The job market may be recovering, but some salary offers are still a few years behind.

Since the labor market began picking up steam, companies hiring for entry-level or administrative spots with pay that would normally range from $40,000 to $50,000 have been offering workers $28,000 to $38,000, says Randy Miller, founder and chief executive of ReadyMinds, a Lyndhurst, N.J., provider of online career counseling and coaching.

.For workers further up the food chain, an offer that might have been $100,000 a few years ago is now coming in at $85,000 or $90,000, he says.

"Companies are more worried these days about margins, profitability, and they are cutting costs across the board. Even though [workers are] qualified and have prior experience, the hiring department has been told to set a budget at a lower range," Mr. Miller says. "Everybody is more price-sensitive these days."

"Big Increase in Mortgage Foreclosures Predicted for this Year" (Miami Herald)

Real estate experts predicted this week that 3.5 million homes nationally will go into foreclosure this year as risky adjustable-rate mortgages written in 2005 reset and unemployment continues.

That's up from 2.8 million homeowners who faced foreclosure in 2009, and sets a pace that isn't likely to plateau until late 2011, said RealtyTrac Senior Vice President Rick Sharga.

Sharga spoke this week in Austin during the 44th annual National Association of Real Estate Editors conference.

"The second wave of toxic loans is about to hit,'' said Sharga, whose Irvine, Calif.-based company tracks foreclosure filings.

"CFOs Signal Worsening Job Market" (CFOZone.com)

More bad news on the hiring front.

CFOs say they are less likely to hire people now than they were three months ago.

According to the latest quarterly Robert Half Financial Hiring Index, six percent of chief financial officers said they plan to hire full-time accounting and finance employees during the third quarter of 2010.

In the prior survey conducted three months ago, seven percent of CFOs indicated they planned to add full-time accounting and finance employees during the second quarter. At the time, the folks at Robert Half celebrated the fact this was the highest hiring forecast since the first quarter of 2009.

Well, that party was short-lived.

"More than 40m Now Use Food Stamps" (Boston Globe)

WASHINGTON — The number of Americans receiving food stamps in March topped 40 million for the first time as the jobless rate hovered near a 26-year high.

Recipients of Supplemental Nutrition Assistance Program subsidies for food purchases totaled 40.2 million, up 21 percent from a year earlier and 1.2 percent more than in February, the Department of Agriculture said yesterday in a statement on its website. The number of recipients has set records for 16 straight months.

"Food Pantries Fear the Future" (Times Herald-Record)

Less assistance, more demand strain resources

KINGSTON — With donations drying up, state money cut and demand skyrocketing, food pantries and soup kitchens in the Hudson Valley are struggling to stay afloat.

"We're doing so much more with fewer resources," said Diane Reeder, executive director of Queens Galley in Kingston. "Even our regular fundraisers aren't pulling in the kind of money we're used to seeing."

For instance, Reeder and the soup kitchen — which serves about 9,000 meals a month — usually raise at least $5,000 by selling food at the Hudson Valley Mayfaire.

But this year, the organization walked away from the May event with only $600.