Financial Sector Could Break Last Year's Layoff Record [Housing Tracker]

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Quote of the Day

"Would Microsoft stop selling software if Lehman collapsed? Would Intel stop selling computer chips? Would Exxon Mobil stop selling oil? Would people stop shopping at Wal-Mart? Would farmers stop buying fertilizer from Potash Corp. and tractors from John Deere?" – An unnamed analyst, on why Lehman will not affect the greater economy. (J.D. Steinghilber in Seeking Alpha, Sept. 15)

Macro Effects of the Housing Slump

Crisis May Prove Cathartic In The Long Run, But The Worst Is Not Over. “The US economy has, over the past year, actually picked its way rather well across the minefield of financial disasters that have made the headlines: the subprime mortgage crisis; the collapse of Bear Stearns, the rescue of Fannie Mae and Freddie Mac… In the year to the end of June the economy expanded by 2.2%, not a spectacular rate for sure. It’s worth remembering, though, that in the year before that – in the 12 months before the housing and financial crises erupted – the economy grew by just 1.8%.” (Times Online, Sept. 16)

Paulson’s Courageous Action. “Larry Kudlow: “Keeping tax rates low, holding back cheap-money inflation, strengthening the dollar, and building a more effective regulatory structure that does not stifle free enterprise is what will promote long-run economic prosperity. For optimists like myself, the plunge in oil and gas pump prices is already producing a sizable tax-cut effect, planting the seeds of recovery for mortgage-holding consumers and everyone else… Mr. Paulson talks about a housing and financial recovery in terms of months, not years. And I think he’s right. His courageous action to put a stop to bailout fever will do as much as anything to move the nation toward recovery.” (National Review, Sept. 15)

Wall Street Shakeout Clouds Housing Picture. “Mark Zandi, chief economist at Moody's Economy.com, said there are two schools of thought on what the latest developments in the credit crunch could mean. They may be the catalyst for a chain of failures throughout the financial system, or a "cathartic event" in which weak links in the financial chain are repaired through mergers like the Bank of America and Merrill Lynch deal. Under the darker scenario, there may be an additional $1.4 trillion in investor losses on top of the $600 billion seen so far, and unemployment could rise sharply into 2010... Under the more optimistic scenario -- which Zandi favors -- the financial crisis is closer to its end than its beginning. Investor losses are likely to total closer to $1T total, and although the economy will remain "recession-like" well into 2009, employment will peak next fall.” (Inman News, Sept. 15)

Wall Street Shakeout Clouds Housing Picture. “Mark Zandi, chief economist at Moody's Economy.com... sees the financial crisis at its apex, winding down by this time next year… In the short term, today's developments look certain to cause more pain for those working in the U.S. financial services sector, which has already seen nearly 103,000 layoffs this year. According to outplacement consulting firm Challenger, Gray & Christmas, the financial services sector could see another 50,000 jobs slashed in 2008, and break last year's record of 153,105 layoffs.” (Inman News, Sept. 15)

Is the High Home Ownership Rate Hurting Michigan? “Michigan has historically [had a homeownership rate] about 8 percentage points above the national average, currently at 68.1% for the country and 76.4% for Michigan… Michigan has had the highest state unemployment rate in the country for at least several years - it was 8.5% in July, 0.60%... Perhaps the high home ownership rate in Michigan, resulting from a legacy of many decades of dependable high-paying auto-related jobs, is now hindering an economic recovery here by tying workers to their Michigan home, reducing their mobility, and keeping the jobless rate high… Homeowners would have to suffer a significant loss to move to another state where jobs are more plentiful.” (Mark J. Perry in Seeking Alpha, Sept. 14)

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