As 2011 draws to an end there is little to celebrate this New Years day.
Paychecks are getting smaller. Rising state and federal government tax’s, gasoline, fresh, canned and frozen food cost, home rentals, utility and clothing cost are eating away at smaller or stagnated paychecks.
At last count near 50 million American families and criminal illegal aliens are receiving food assistance, food stamps (SNAP) funded on the backs of Americas workers through federal/state tax collections. The largest number ever recorded since the programs conception.
While Towns, Cities and States scramble to balance budgets, many cutting the number they employ, raising taxes, cutting police , firefighting service and other public services. The Obama administration has ‘Squandered’ $7 trillion tax payer dollars in failed job stimulus plans, bank, city and state bailout plans. Driving the U.S. government to the verge of bankruptcy.
During 2011, Republican led House of Representative’s has passed and sent to the Democrat dominated Senate more than 40 bills to help small and large business jump start the U.S. economy. Senate majority leader, Democrat from Nevada, Harry Reid is refusing to bring any of the House Bills up for debate or vote in fear that their passage will damage Obama’s chance for reelection in 2012.
Sears has announced it will close 100-120 stores in 2012. To date 38 Kmart stores, 25 Sears full-line shops, two Sears hardline only locations and it will also close 14 Grand/Essentials stores. Experts estimate that as many as 9,500 Sears/Kmart employees will hit the unemployment lines in 2012.
The GW Bush and BH Obama’s recession (part 1) was declared in December 2007 and the Obama administration said this recession ended July 2009. Tell that to the 15 million that are still unemployed. Tell it to the millions that have lost their homes in bank foreclosures, the 11 million that currently have mortgages that are more than the value of their homes, the 50 million on food stamps. Many places in the U.S. home and property values have fallen 50 to 70 percent since 2007. Expert economist forecast home and property values to fall another 10 percent in 2012.
BH Obama recession/depression (part 2). Banks have inventories of as many as 2 million foreclosed homes which have not even been released to the market. Home prices could fall another 10% if current trends persist.
Experts believe that the unemployment rate will not improve significantly until the monthly gain in jobs is consistently above 300,000 jobs or more. And, at that rate the gains would have to go for more than two years into 2014 to bring the economy back to what is traditionally considered a reasonable unemployment figure.
Inflation There is almost nothing that damages consumer confidence as a rapid rise in prices. Starbucks recently increased the price of a bag of coffee by 17% because wholesale prices have risen by almost twice that rate in the last year. Cotton prices nearly doubled in 2010. Summer clothing prices are up as much as 20%. Consumers today pay far more for sugar, meat, wheat and corn-based products as well.
American budgets have been hurt by the rising cost of gas. Americans of more modest means have been particularly hard affected. A slowdown in driving usually also leads to a decline in the retail sector as consumers reduce unnecessary travel to stores and purchasing only necessities. The U.S. national deficit has caused a call for severe austerity measures which have already become part of the economics policies of countries from Greece to the UK to Japan. Job cuts in the U.S. will not be restricted to the federal level. A recent Investment Research analysis predicted that state and local governments will cut 450,000 jobs this year and next. That process is already well underway. States like California and New York are currently running massive budget deficits.
Unemployment creates two immediate problems. People without jobs drastically curtail their spending. The second is the need for tens of billions of dollars every year in government aid to keep the unemployed from becoming destitute. That support will increase U.S. government and state deficits, the domino effect is that cash strapped governments need to make more spending cuts. It may be the biggest challenge state and federal government economy faces.
People in their 20s must accept low wages to enter the workforce. This will delayed their prime consuming years well into their 30s which will damage the U.S recovery now and for another decade. The worst of the unemployment problem is the roughly 5 million Americans who will remain unemployed well into the 2012-2013 years. Their unemployment benefits have run out in many cases. The burden of their care falls to their families, friends, community organizations, and non profits. A family which has to support an unemployed person may be a family which cannot spend beyond its basic needs.
The New York Federal Reserve report published early this year said that “When home prices began to fall in 2007, owners’ equity in household real estate began to fall rapidly from almost $13.5 trillion in 1Q 2006 to a little under $5.3 trillion in 1Q 2009, a decline in total home equity of over 60%.” Real estate research firm Zillow reported on more recent developments. “Negative equity in the first quarter reached new highs with 28.4 percent of all single-family homes. Mortgages underwater, are now at 27 percent.”
Many homeowners who want to sell their homes cannot do so because they cannot afford to pay their banks at closing. Economists point out this leverage helped contribute to the credit crisis as people could not cover the costs of home equity loans as real estate values collapsed. Their ability to consume was severely damaged, further harming the U.S. economy. High mortgage payments bankrupted or nearly bankrupted people who have lost jobs or have found that their incomes had stagnated. The building industry became a shambles overnight.
There is no relief in sight because potential buyers worry that price erosion has not ended.
Happy 2012 New Year