THE US economy, traditionally the engine room for the world, is in a recessionary tailspin.
At least according to US analysts' increasingly dire predictions.
While the Bush Administration insists recession will be avoided, economists almost daily are lifting the odds.
Australian analysts are taking a sunnier view and mostly expect a slowdown but not a full-blown US recession – usually defined as two straight quarters of negative economic growth.
Recession talk erupted after the US unemployment rate, released last week, rose sharply in December and manufacturing activity sank to the level that signals a contracting economy.
The key concern is that the crisis that began early last year with the collapse of assets linked to high-risk mortgage borrowers, a small part of the mortgage sector in the US, is spilling into the broader economy, causing businesses to axe jobs and US consumers to cut off the spending lifeline holding their economy afloat.
US consumer spending is responsible for about two-thirds of America's economic activity.
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Friday, January 11, 2008
No Jobs for the New Economy or the Old
Story Highlights
- 13,000 private sector jobs lost in December 2007
- Waitresses and bartenders accounted for 29% of the new jobs in 2007, Architectural and engineering services account for only 54,700 jobs
- Paul Craig Roberts: “There were more jobs for hospital orderlies than for architects and engineers. Waitresses and bartenders accounted for as many of last year's new jobs as the entirety of professional and business services.”
December did not bring Americans any jobs. To the contrary, the private sector lost 13,000 jobs from the previous month.
If December is a harbinger of the new year, it is going to be a bad one. The past year, hailed by Republican propagandists and "free trade" economists as proof of globalism's benefit to Americans, was dismal. According to the Bureau of Labor Statistics' nonfarm payroll data, the U.S. "super economy" created a miserable 1,054,000 net new jobs during 2007.
This is not enough to keep up with population growth -- even at the rate discouraged Americans, unable to find jobs, are dropping out of the workforce -- thus the rise in the unemployment rate to 5 percent.
During the past year, U.S. goods producing industries, continuing a long trend, lost 374,000 jobs.
But making things was the "old economy." The "new economy" provides services. Last year, 1,428,000 private sector service jobs were created.
Are the "free trade" propagandists correct that these service jobs, which are our future, are high-end jobs in research and development, innovation, venture capitalism, information technology, high finance, and science and engineering, where the U.S. allegedly has such a shortage of scientists and engineers that it must import them from abroad on work visas?
Not according to the official job statistics.
Thursday, January 10, 2008
EADS to 'continue to target' mid-sized US acquisitions
EADS chief executive Louis Gallois said the company will 'continue to target' mid-sized acquisitions in the US as part of its drive to combat the weakness of the dollar and achieve a 'better balanced' company.
Gallois said 'with our cash position, we have the capacity to buy,' but did not give further details of likely targets.
'The dollar is very low - it is the right time to buy in the states. A large part of our customers are in the United States. We have to demonstrate a large footprint to be able to sell to these clients.'
Gallois said the company is targeting 10 bln eur sales in the American market, excluding Airbus, compared with a current level of around 2 bln eur.
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Gallois said 'with our cash position, we have the capacity to buy,' but did not give further details of likely targets.
'The dollar is very low - it is the right time to buy in the states. A large part of our customers are in the United States. We have to demonstrate a large footprint to be able to sell to these clients.'
Gallois said the company is targeting 10 bln eur sales in the American market, excluding Airbus, compared with a current level of around 2 bln eur.
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Profits at U.S. Companies May Drop on Subprime Losses
Profits at U.S. companies probably fell in back-to-back quarters for the first time in almost six years as financial firms led by Citigroup Inc. and Merrill Lynch & Co. lost billions of dollars and retailers suffered what may be the worst holiday shopping season since 2002.
Fourth-quarter earnings of Standard & Poor's 500 Index members may have dropped an average of 8.1 percent from a year earlier, according to data compiled by Bloomberg. Profits fell 2.5 percent in the third quarter.
Rising defaults forced financial institutions to announce about $100 billion in subprime mortgage losses last year, while the worst housing slump in 27 years and $3-a-gallon gasoline curtailed consumer buying during the Christmas shopping season. Retail sales growth in November and December may have been the slowest in five years.
``People are concerned about the economy,'' said Charles Rotblut, senior market analyst at Zachs Investment Research in Chicago. ``They're seeing a lot of foreclosures, rising oil prices, and they themselves are overly stretched.''
The last consecutive quarterly profit decline occurred in the six months ended in March 2002, as the U.S. was emerging from an eight-month recession that ended in November 2001. The drop in fourth-quarter earnings would be the first year-over- year decline for that period since 2001.
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Fourth-quarter earnings of Standard & Poor's 500 Index members may have dropped an average of 8.1 percent from a year earlier, according to data compiled by Bloomberg. Profits fell 2.5 percent in the third quarter.
Rising defaults forced financial institutions to announce about $100 billion in subprime mortgage losses last year, while the worst housing slump in 27 years and $3-a-gallon gasoline curtailed consumer buying during the Christmas shopping season. Retail sales growth in November and December may have been the slowest in five years.
``People are concerned about the economy,'' said Charles Rotblut, senior market analyst at Zachs Investment Research in Chicago. ``They're seeing a lot of foreclosures, rising oil prices, and they themselves are overly stretched.''
The last consecutive quarterly profit decline occurred in the six months ended in March 2002, as the U.S. was emerging from an eight-month recession that ended in November 2001. The drop in fourth-quarter earnings would be the first year-over- year decline for that period since 2001.
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Forecasters: No quick end to housing ills
It could be a long slump.
Housing prices in Massachusetts and the nation likely will keep falling through next year and beyond, according to a growing chorus of economic forecasters.
Eric Rosengren, president of the Federal Reserve Bank of Boston, told a Hartford audience yesterday that the current housing slump could be the longest in 50 years, increasing the risk of a broader economic downturn.
Rosengren said spending by home buyers has declined in every three-month period since the beginning of 2006, and likely will continue to fall through at least June 2008. That would be the longest downturn since 1958.
Falling home prices hurt the broader economy, in part by reducing consumer spending, Rosengren said. In turn, a broader economic decline cuts spending on housing. The back-and-forth can create a downward spiral.
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Housing prices in Massachusetts and the nation likely will keep falling through next year and beyond, according to a growing chorus of economic forecasters.
Eric Rosengren, president of the Federal Reserve Bank of Boston, told a Hartford audience yesterday that the current housing slump could be the longest in 50 years, increasing the risk of a broader economic downturn.
Rosengren said spending by home buyers has declined in every three-month period since the beginning of 2006, and likely will continue to fall through at least June 2008. That would be the longest downturn since 1958.
Falling home prices hurt the broader economy, in part by reducing consumer spending, Rosengren said. In turn, a broader economic decline cuts spending on housing. The back-and-forth can create a downward spiral.
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US could spark global fall - UN
THE apparent US economic slowdown could trigger global recession this year and stymie years of robust growth in Asia and Africa, the UN said."
The major uncertainty for 2008 now emanates from the US economy," according to the world body's World Economic Situation and Prospects 2008. "
A further slowdown in the world's major economy will hit many of the poor nations hard, as it will slow world trade and put an end to the boom in commodity prices that benefited them over the past years," it said.
The report said the economies of Japan and Western Europe, already operating near production potential, were not capable of taking up the slack. "
The domino effect of a US recession would be to knock down export growth from China, Europe and Japan, in turn reducing their demand for exports from developing countries," it said.
The report forecast that the world economy would grow at 3.4 per cent this year, down from 3.7 per cent in 2007 and 3.9 per cent in 2006.
It stressed that world growth was "robust and broad-based" last year, with more than 100 economies posting 3 per cent growth of per capita output or more.
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The major uncertainty for 2008 now emanates from the US economy," according to the world body's World Economic Situation and Prospects 2008. "
A further slowdown in the world's major economy will hit many of the poor nations hard, as it will slow world trade and put an end to the boom in commodity prices that benefited them over the past years," it said.
The report said the economies of Japan and Western Europe, already operating near production potential, were not capable of taking up the slack. "
The domino effect of a US recession would be to knock down export growth from China, Europe and Japan, in turn reducing their demand for exports from developing countries," it said.
The report forecast that the world economy would grow at 3.4 per cent this year, down from 3.7 per cent in 2007 and 3.9 per cent in 2006.
It stressed that world growth was "robust and broad-based" last year, with more than 100 economies posting 3 per cent growth of per capita output or more.
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U.S. debt out of control
"A billion dollars here, a billion dollars there; pretty soon we're talking real money."
This oft-repeated aphorism attributed to former Sen. Everett Dirksen, R-Ill., should have three more zeros behind it to bring it up to date.
The national debt of near $10trillion, which represents the accumulated impact of all of America's internal budget deficits, will be the lasting legacy of today's executive and judicial branches as a new administration takes over on Jan. 20, 2009.
Ironically, this will double the amount faced by the elder George Bush, in 1988, when he took office. His predecessor, Ronald Reagan, who rebuilt America's military potential, and was credited with bringing down the Soviet empire, quintupled the $1 trillion debt he inherited from President James Earl Carter Jr.
Only during World War II, as the U.S. built the largest war machine ever, did the national debt represent a greater per-capita yoke on every single American. It was also the only time that the debt's percentage of America's gross domestic product has exceeded the present level.
These out-of-control expenditures represent a system that is totally devoid of fiscal responsibility. In addition to an overwhelming percentage of America's expenditures represented by entitlements such as Social Security, Medicare, drugs for senior citizens and defense, the president did not exercise his veto power except for the negation of federal aid for stem cell research during his first term.
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This oft-repeated aphorism attributed to former Sen. Everett Dirksen, R-Ill., should have three more zeros behind it to bring it up to date.
The national debt of near $10trillion, which represents the accumulated impact of all of America's internal budget deficits, will be the lasting legacy of today's executive and judicial branches as a new administration takes over on Jan. 20, 2009.
Ironically, this will double the amount faced by the elder George Bush, in 1988, when he took office. His predecessor, Ronald Reagan, who rebuilt America's military potential, and was credited with bringing down the Soviet empire, quintupled the $1 trillion debt he inherited from President James Earl Carter Jr.
Only during World War II, as the U.S. built the largest war machine ever, did the national debt represent a greater per-capita yoke on every single American. It was also the only time that the debt's percentage of America's gross domestic product has exceeded the present level.
These out-of-control expenditures represent a system that is totally devoid of fiscal responsibility. In addition to an overwhelming percentage of America's expenditures represented by entitlements such as Social Security, Medicare, drugs for senior citizens and defense, the president did not exercise his veto power except for the negation of federal aid for stem cell research during his first term.
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